What tax deductions can rental property owners claim each year?

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Here are common rental property tax deductions landlords should review each year:

1. Property taxes
    State and local real estate taxes paid on the rental property are generally deductible as rental expenses.
2. Repairs and maintenance
    Repairs that keep the property in ordinary operating condition, such as fixing leaks, repainting or replacing broken components, are typically deductible in the year paid. Improvements that add value or extend useful life are usually capitalized and depreciated.
3. Insurance
    Premiums for landlord, liability, fire, hazard and similar insurance coverage are generally deductible.
4. Depreciation
    Residential rental buildings are generally depreciated over 27.5 years, excluding land. That makes depreciation especially valuable because it can reduce taxable income without a current cash payment.
5. Mortgage interest
    Interest paid on debt used to acquire, improve or operate the rental property is often one of the largest annual deductions. The deductible amount is typically reported by the lender on Form 1098.
6. Property Management Fees
    Fees paid to property managers, leasing agents or tenant placement services are common rental property deductions.
7. Professional fees
    Tax preparation, legal advice, bookkeeping and accounting software related to the rental activity may qualify as deductible expenses.
8. Utilities paid by the landlord
    If the owner pays water, sewer, trash, gas, electric or similar costs, those expenses may be deductible. If the tenant pays them directly, the landlord does not deduct them.
9. Advertising and leasing costs
    Listing fees, photography, signage and marketing expenses used to find tenants are generally deductible.
10. HOA and condo association fees
     If the rental property is part of an HOA or condo association, dues and assessments paid by the landlord are generally deductible as rental expenses.
11. Closing costs and settlement items
     Some closing costs are deductible, while others are added to the property’s basis and recovered through depreciation. Settlement statements should be saved and reviewed carefully so purchase, refinancing and sale costs are treated correctly.
12. Legal, eviction and tenant-related costs
     Legal fees tied directly to the rental property, including lease disputes, eviction proceedings or collection matters, may be deductible. The key is that the cost must relate to the rental activity, not a personal matter

Bonus Depreciation may also be relevant for certain property components, particularly after a cost segregation study. IRS guidance notes that the One Big Beautiful Bill Act generally provides a permanent 100% additional first-year depreciation deduction for qualified property acquired after January 19, 2025.

The Impact of Rising and Falling Interest Rates is also worth modeling. Interest rates are a fundamental driver of the real estate market, influencing everything from property values and investor returns to the cost of financing and the overall health of the sector. Whether you’re a developer, investor, or property owner, understanding the relationship between interest rates and real estate is essential for making informed decisions.

Overall, the key is documentation. Receipts, loan statements, property tax bills, mileage logs, leases and bank records help substantiate tax deductions for rental property. Many rental property expenses tax deductible in one year may need to be depreciated if they are improvements, so owners should classify costs carefully. For more complex landlord tax deductions, especially depreciation, passive loss rules and repairs versus improvements, consult a tax advisor.

How BT Can Help

For more than four decades, Bennett Thrasher has provided businesses and individuals with strategic business guidance and solutions through professional tax, audit, advisory, and business process outsourcing services. Contact Trey Webb, partner in charge of Bennett Thrasher’s Real Estate and Hospitality Tax Group, or call us at 770.396.2200.

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