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Rental Property Deductions

Owning a rental property means that you are a business owner and property owner at the same time. Because of this, the owner must be aware of key rental property deductions that you can take every year to help manage your tax liabilities. It is important to remember that these deductions are not the same as depreciation, which happens to your existing structures and value improvements that occur over a specific period of time.

1. Travel Expenses Can Be Deducted

The easiest deduction to take when you travel to your rental property to care for it is the standard deduction, which gives you a certain amount per mile. You can also keep track of actual expenses over the year. Make sure to save all of your receipts and keep an odometer log.

2. Any Emergency Repairs Can Be Deducted

That phone call at 2am might not be a pleasant experience, but it is a pleasant deduction when tax time comes around. Most emergency repairs qualify as a deduction instead of for depreciation. The only exceptions would be if you had to install a new appliance, like a water heater, or a new roof instead of repairing the existing structure. This deduction includes labor.

3. Property Taxes are Always Deducted

Whatever property tax you need to pay on your property can be deducted as an expense on your taxes. In some jurisdictions, all large item taxes, including sales taxes, can also be deducted. This would mean if you replaced the water heater, you’d have to depreciate the appliance, but you might be able to deduct the sales tax.

4. Loan Expenses are Always Deductible

Anything that you need to pay in order to obtain a mortgage or a loan to help your rental property get amortized into the life of your mortgage. It is your interest that is deductible. Don’t deduct your entire mortgage payment, however, because the principal you pay down is not deductible.

5. Sometimes Lawn Care Qualifies as a Deduction

The issue at hand is whether or not the work is actually improving the value of the home. Routine lawn care, like mowing, weeding, or fertilizing are all considered expenses because it is considered maintenance. If you hire a lawn care specialist to install a retaining wall, however, this would not qualify as a deduction.

6. Losses From Theft are Always Deductible

Even if your insurance company has covered your losses, they may still be deductible if you experienced an overall financial penalty. This typically happens through the deductible on the insurance policy and if there is any value gaps between the replacements value of an item and the depreciated value of the stolen item. While you’re at it, don’t forget to deduct your insurance premiums too.

7. Fees or Assessments to Care For Common Property are Deductible

This would include HOA fees, condominium fees, or other payments that are made to help a community or a neighborhood is well-maintained. Just make sure to keep good records so that you can prove all of your deductions should questions be asked of your tax return. By doing so, you’ll be able to maximize the value of yo

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