Rental property ownership comes with a meaningful set of tax deductions. Most landlords leave money on the table because they do not know what qualifies or they do not keep good enough records. Here is what you can generally deduct and what you cannot.
What You Can Deduct
Mortgage interest. The interest portion of your mortgage payment on the rental property is deductible. This is typically one of the largest deductions for landlords, especially in the early years of a loan when interest makes up most of the payment. Principal repayment is not deductible.
Property taxes. The real estate taxes you pay on the rental property are deductible as a rental expense. This is separate from the property tax deduction limits that apply to your personal residence.
Insurance premiums. Your landlord insurance premium is a deductible business expense. This includes the base policy and any add-ons you pay for as part of the rental operation. Keep your annual statement from your insurer for your records.
Repairs and maintenance. Work done to keep the property in its current condition is deductible in the year you pay for it. Fixing a leaky faucet, repainting between tenants, replacing a broken window, servicing the furnace. These are repairs. Deduct them when you pay them.
Property management fees. If you pay a property manager, their fees are deductible as a rental operating expense.
Depreciation. This is the big one that many landlords miss or underuse. The IRS allows you to deduct the cost of a residential rental building over 27.5 years. If the building portion of your property is worth $275,000, you can deduct $10,000 per year in depreciation, even if the property is appreciating in market value. Land does not depreciate, only the structure.
Travel to the property. Reasonable travel costs to manage or inspect your rental are deductible. Keep a log. Track the miles, dates, and purpose of each trip. If you fly to an out-of-state property for a legitimate inspection or repair oversight, that travel is generally deductible.
Professional fees. Attorney fees, accountant fees, and fees paid to professionals related to the rental business are deductible. If you pay a lawyer to handle an eviction or a CPA to prepare your Schedule E, those costs qualify.
What You Cannot Deduct
Capital improvements in the year you make them. There is an important line between a repair and an improvement. Replacing a broken faucet is a repair. Replacing all the plumbing in the house is an improvement. Improvements add value or extend the life of the property. They must be depreciated over time, not deducted immediately. This distinction matters and is a common audit trigger.
Personal use portions. If you use the property personally during the year, you must allocate expenses between personal and rental use. Only the rental portion is deductible. If you use a vacation property 30 days for yourself and rent it out 120 days, you can only deduct 80 percent of the expenses.
Why Keeping Records Matters
Rental property returns get scrutiny. Schedule E is a common audit area. The difference between winning and losing an audit is documentation. Keep receipts for every repair and maintenance item. Keep your insurance statements. Log your mileage. Save your property management invoices. Keep these for at least three to seven years after the tax year they relate to.
A dedicated folder, physical or digital, for each property per year is the simplest system that works.
The Insurance Premium Is Already Deductible
One benefit of having proper landlord insurance is that the premium is a legitimate deductible business expense. You are not just protecting the property. You are paying for something the IRS already recognizes as a cost of operating a rental business. That does not make insurance free, but it does reduce the after-tax cost.
Bottom Line
The major deductions are mortgage interest, property taxes, insurance, repairs, depreciation, property management fees, travel, and professional services. Improvements must be depreciated, not expensed. Keep records for everything. Work with a CPA who knows rental properties. The deductions are real, and they are worth tracking correctly.
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