Rental property tax law is unusually generous to investors. Every April, landlords leave thousands of dollars on the table by missing deductions they are clearly entitled to. Here are the 12 most commonly overlooked.
This article is educational. Work with a CPA familiar with real estate for your specific situation.
1. Depreciation
The single largest deduction most landlords take. Residential real estate depreciates over 27.5 years (straight-line). On a $300K rental (excluding land value, roughly 80% of purchase price), you deduct roughly $8,700/year. Often wipes out most of your rental income on paper.
2. Mortgage Interest
100% deductible on loans secured by the rental. Includes origination points (amortized over loan life).
3. Property Taxes
Fully deductible, no cap (unlike the $10K SALT cap on personal returns).
4. Insurance
All property insurance, liability, umbrella (pro-rated for rental use), and even flood insurance premiums.
5. Repairs & Maintenance
Anything that returns the property to working order — roof patching, plumbing repair, painting, appliance repair. Deductible in the year incurred. Distinguished from improvements, which must be capitalized.
6. Management Fees
If you use a property manager, 100% deductible. If you self-manage, the time itself is not deductible, but related expenses are.
7. Travel to the Property
IRS standard mileage rate (67¢/mile for 2025) for trips to your rental for management purposes — inspections, showings, repairs, meeting tenants. Keep a mileage log.
8. Professional Services
- Accountant/CPA fees
- Attorney fees related to the rental (lease drafting, eviction)
- Real estate agent commissions on leasing (not on sale — those reduce basis)
9. Utilities You Pay
Any utilities you cover as landlord — common area electric, water, sewer, trash, lawn care. Fully deductible.
10. Advertising & Screening
Listing fees, photography, screening services, credit checks. All deductible.
11. Home Office (If You Qualify)
A dedicated home office space used exclusively for rental management qualifies for the home office deduction — either simplified ($5/sqft up to 300 sqft) or actual expense method. Requires exclusive and regular use.
12. Bonus Depreciation on Components
Appliances, flooring, HVAC components, and certain other items can be depreciated over 5–15 years instead of 27.5. Cost segregation studies break out components for accelerated depreciation — typically worth it on properties over $500K.
Short-Term Rentals Are Different
STRs (like Airbnbs) with average stays under 7 days and material participation can avoid passive loss limitations entirely — allowing losses to offset W-2 income. Discuss with a CPA; the rules are strict.
The Passive Loss Question
Rental losses are "passive" by default and can only offset other passive income. Exceptions:
- Up to $25,000 of losses deductible against regular income if AGI is under $100K (phases out by $150K)
- Real Estate Professional Status (REPS) — 750+ hours/year in real estate activities, more hours in real estate than any other activity. Unlocks unlimited offset.
- Short-term rentals with material participation (see above)
Tracking Systems
Best-in-class investors track expenses monthly, not annually:
- Separate bank account per property (or at least per portfolio)
- Accounting software (Stessa, REI Hub, QuickBooks)
- Receipt storage (Evernote, Dext, Expensify)
- Monthly P&L review
When to Hire a CPA
Once you own 2+ properties, a real estate CPA pays for themselves 5–10x. They catch deductions you would miss, structure entities tax-efficiently, and keep you out of trouble. Typical cost: $800–$2,500/year for a straightforward rental portfolio.
Real estate is one of the most tax-advantaged asset classes in America. Make sure you are taking full advantage.
Ready to finance your next deal?
Get a rate quote in under 60 seconds — no credit pull, no obligation.