What rental expenses can I deduct from my taxes?

You can deduct ordinary and necessary operating, maintenance, and financial expenses incurred to manage, conserve, and maintain your residential rental property.

📌 Common Deductible Expenses

• Mortgage interest: Loans used to buy, build, or improve the property.
• Property taxes: State and local real estate taxes levied on the property.
• Insurance: Premiums for landlord, liability, or hazard insurance policies.
• Repairs and maintenance: Routine upkeep like painting, fixing leaks, or lawn care.
• Utilities: Electricity, gas, water, or internet paid by the landlord.
• Professional fees: Legal, accounting, and property management services.
• Advertising: Costs to market the rental property to prospective tenants.
• Travel and auto: Mileage or actual expenses for property visits and maintenance trips.

📊 Repairs vs. Capital Improvements

• Repairs: Keep the property in normal, efficient operating condition and are fully deductible in the year paid (e.g., fixing a broken window).
• Improvements: Add to the value, prolong the useful life, or adapt the property to new uses; these must be depreciated over time (e.g., installing a new roof or HVAC system).

📉 Depreciation

• You can recover the cost of the building (excluding land) over 27.5 years for residential rental property using standard IRS depreciation rules.

You can write off ordinary and necessary expenses incurred to manage, maintain, and operate your rental property.

Common Operating Write-Offs

You can deduct these expenses in the year you pay for them:

• Mortgage Interest: The interest portion of your mortgage payment (not the principal), plus loans used for property improvements.
• Property Taxes: State and local real estate taxes assessed on the rental, which are not subject to the personal $10,000 SALT cap.
• Insurance: Premiums for landlord liability, hazard, or flood insurance.
• Repairs and Maintenance: Routine upkeep like painting, fixing leaks, servicing HVAC, or pest control that keeps the property in good condition.
• Professional Fees: Fees paid to a property manager, accountant, lawyer, or for tenant screening.
• Advertising: Online listing fees, signage, or professional photography to find tenants.
• Utilities: Electricity, water, gas, and internet if you pay for them under the lease.
• Travel and Auto: Mileage or actual vehicle expenses when driving to inspect the property or buy repair parts.

Depreciation and Major Improvements

• Depreciation: You can recover the cost of the residential building (excluding land) over 27.5 years using the straight-line method, as outlined in official IRS Guidelines. Appliances and furniture are typically depreciated over 5 years.
• Improvements vs. Repairs: Major upgrades that add permanent value or lengthen the life of the property (like a new roof) must be capitalized and depreciated over time rather than deducted all at once.

For complete official rules on what qualifies as a deductible expense, check the TurboTax Rental Property Guide.

The $2,500 expense rule, officially known as the de minimis safe harbor election, is an IRS tax provision that allows businesses to immediately deduct the full cost of low-cost tangible property in a single tax year instead of capitalizing and depreciating it over several years.

Key Rules and Limits

• The Threshold: Businesses without an Applicable Financial Statement (AFS, such as an audited financial statement) can expense items costing up to $2,500 per invoice or individual item. If a business has an audited AFS, the limit increases to $5,000.
• Qualifying Items: This applies to tangible property like office furniture, computers, tablets, small tools, and equipment. It does not apply to inventory or land.
• Invoices vs. Items: The limit applies to what is listed on the invoice. If an invoice breaks out individual items, each item is tested separately against the $2,500 limit.

How to Use the Rule

• Consistency: You must match your bookkeeping to your tax deduction; you must expense these items on your books throughout the year.
• Annual Election: It is a "use it or lose it" choice that you must make every year. You elect it by attaching a specific statement titled "Section 1.263(a)-1(f) de minimis safe harbor election" to your timely filed federal tax return. Many popular tax software programs handle this automatically if you check the appropriate box.

The 10 most commonly overlooked tax deductions include everyday expenses, state taxes, and specific out-of-pocket costs that taxpayers frequently forget to claim.

Top 10 Overlooked Tax Deductions

• State Sales Taxes: You can choose to deduct state and local sales taxes instead of state and local income taxes, which is especially helpful if you live in a state without an income tax or made a large purchase like a car.
• Out-of-Pocket Charitable Contributions: Expenses incurred while doing volunteer work—such as parking fees, tolls, and charitable driving mileage (valued at 14 cents per mile)—are deductible.
• Student Loan Interest Paid by Others: If a parent or someone else pays your student loan, you can still claim the deduction on your taxes as long as you are the person legally required to repay the loan.
• Jury Pay Turned Over to Employer: If your employer kept your daily jury duty pay while you used your paid time off, you can deduct the amount you turned over to them from your taxable income.
• Refinancing Mortgage Points: When you refinance a mortgage, you cannot deduct all the points in a single year; instead, you must deduct them gradually (amortize them) over the life of the new loan.
• State Income Tax Paid in Spring: Any state income tax you paid in the spring of the filing year for a prior year's return can sometimes be added to your itemized deductions.
• Educator Expenses: Eligible K-12 teachers can deduct out-of-pocket spending on classroom supplies and books.
• Gambling Losses: If you itemize your deductions, you can deduct gambling losses up to the total amount of your reported gambling winnings.
• Moving Expenses for Military: While civilian moving expense deductions are largely paused, active-duty military members moving under orders for a permanent change of station can still deduct qualified moving costs.
• Alimony Paid: If your divorce agreement was finalized on or before December 31, 2018, the alimony payments you make to a former spouse remain tax-deductible.

You can review more details and advice on maximizing your return with tools like the TurboTax Tax Tips Guide or general filing info from H&R Block Tax Center.

You can deduct ordinary and necessary operating expenses—such as mortgage interest, property taxes, repairs, and depreciation—directly from your rental income to lower your taxable profit.

You can review official guidelines and reporting rules on the Internal Revenue Service portal.

Common Deductible Expenses

• Mortgage Interest: The interest paid on loans used to buy, build, or improve the property.
• Property Taxes: State and local real estate taxes levied on the rental property.
• Repairs and Maintenance: Routine upkeep like fixing a leaky faucet, painting, or lawn care done in the payment year.
• Insurance: Premiums for fire, flood, theft, or landlord liability insurance.
• Utilities: Costs you pay for gas, electric, water, or trash if not covered by the tenant.
• Management Fees: Payments made to third-party property managers or leasing agents.
• Advertising: Fees for online listings, signs, or photography to find tenants.
• Legal and Professional Fees: Costs for tax preparation, bookkeeping, or eviction proceedings.
• Travel Expenses: Mileage or transit costs for driving to inspect or manage the property.
• Depreciation: The recovery cost for the wear and tear on the residential building over 27.5 years.

Non-Deductible Expenses

• Capital Improvements: Major upgrades that add permanent value (like a new roof or HVAC system)—these must be depreciated over time rather than deducted all at once.
• Personal Expenses: Costs related to your own personal use of the home or personal commuting.
• Principal Mortgage Payments: Only the interest portion of your loan payment is deductible.