Rental Property Tax Deductions: What You Can Actually Claim

Most new landlords deduct the mortgage interest, the insurance and the obvious repairs, then stop. That's usually leaving money on the table — not through anything clever, just through not knowing what counts.

Here's the working list, and the two things people get wrong.

The everyday ones

These are the running costs of the property, and they come off the rent in the year you pay them:

• Mortgage interest — the interest, not the principal
• Property taxes
• Insurance — landlord policy, and umbrella coverage attributable to the rental
• Repairs and maintenance — fixing what's there, as opposed to improving it
• Management fees, leasing fees and tenant-placement costs
• Professional fees — the part of your accountant's bill relating to the rental, legal advice on the lease
• Utilities you pay rather than the tenant
• HOA or condo fees
• Advertising the property

Two more worth asking about: mileage for landlord trips, and a home office if you run the rentals from a dedicated space at home. Both are conditional — the IRS has specific tests for each, and ordinary trips from home to the property often don't qualify — and both need records kept at the time. Worth an hour with an accountant before you start logging.

The big one people forget

Depreciation. It's usually the largest single deduction on a rental and it doesn't cost you anything in cash — you're writing off the building's value over 27.5 years.

Plenty of accidental landlords never claim it, often because nobody told them it existed. That's expensive twice over, because when you sell you're taxed as though you had claimed it either way. If that's you, it's fixable — see never claimed depreciation on your rental.

We explain how the figure is worked out in how rental property depreciation works.

The distinction that trips everyone up

Repairs versus improvements. Fixing a broken furnace is a repair and comes off this year's income. Replacing the whole heating system is an improvement — it gets added to the property's value and depreciated over years instead.

The line matters because getting it wrong in either direction costs you: claim an improvement as a repair and you have a problem if questioned; treat a repair as an improvement and you've deferred a deduction you could have taken now. We go through it in repairs vs improvements.

What it depends on

Whether the expense is genuinely about the rental. Mixed personal and rental use needs apportioning, and that's where records matter.

When the property was placed in service. Costs before it's ready and available for rent are generally treated differently from running costs afterwards.

Whether you can use the deductions this year. Deductions produce a loss, and rental losses have their own rules about whether they can reduce your other income. That catches a lot of people out.

Where to go next

Deductions are the easy part. The two places landlords actually lose money are depreciation they never claimed and the tax bill when they sell — both bigger numbers than anything on the list above.

Our calculators work through both, free and without a sign-up. And if your return is more involved than a spreadsheet can settle, you can ask to be introduced to a specialist in your state — no commitment or fee required.