20 Rental Property Tax Deductions You Need To Know About [By Category]

Death and taxes. They say these are the only two guaranteed things in life. And they’re not wrong.

And yet, there are also a number of beneficial rental property tax deductions that can also save you money and help you keep more of your earned investment.

Disclaimer: We’re not tax professionals. You should always consult your accountant or a qualified financial advisor before counting on any or all of these tax deductions.

That said, we’ve been at this game for decades and operate dozens of rental property investments, both as part of Teifke Real Estate as well as personally. We’re sharing with you some of the gold nuggets we’ve learned over the years of successful passive income generation and managing our own rental property tax deductions.

Travel Expenses

Long-Distance Travel

If your rental property Investments require long-distance travel for you to manage them, your travel expenses are often deductible. This could include car miles, rental cars, plane tickets, and hotel costs.

Local Travel

If your properties are local, travel expenses may still be covered. If you’re routinely checking each property, handling maintenance, heading to the hardware store, and using your personal vehicle to do so, these expenses could be deducted.

Financial Expense Deductions

These are all the little things that add up over time. Be sure to take advantage of whatever rental property tax deductions apply to you.

Mortgage Interest Fees

If there’s a mortgage on your rental property investment, you’re paying interest on the loan every month. this interest can be deducted as a rental expense on your taxes. While this also applies to every homeowner, it’s even more valuable for real estate investors and usually amounts to the largest deduction available.

Insurance

Insurance for real estate investors is often significantly more costly than standard residential homeowners insurance. A portion of your insurance premium may be deductible.

Capital Expenses

Capital expenses are larger purchases and assets that could potentially contribute to future income generation. This could include equipment, computer software, machinery, additional properties, and vehicles. This would not include expenses related to raw materials or inventory.

Property-Related Rental Tax Deductions

Repairs and Maintenance

Any projects that are required in order to maintain the safety and functionality of the home are considered repair and maintenance. This is not to be confused with property improvements for aesthetic purposes.

Repair and maintenance expenses would include painting, drywall repair, reducing the ventilation system, replacing the air conditioner, updating the windows, home cleaning, new carpet, repairing neglected landscaping, replacing the siding, roofing, and more. Keep all the receipts for any contractors or equipment rentals for later documentation.

BONUS Deduction: Energy Efficiency

You may also find specific tax deductions for improvements related to increasing energy efficiency.

Fire or Natural Disaster Losses

Some circumstances simply can’t be predicted. In the worst-case scenario, if a property is severely damaged or even completely lost due to an actual disaster or fire, you can claim this on your tax return. However, it’s worth noting that this number must be in alignment with what’s covered by your insurance carrier.

Depreciation

Every year, you can calculate your property’s depreciation value and count this as a tax deduction. In addition to helping you preserve funds, this is also a required deduction by the IRS.

Keep in mind the potential for a recapture tax if the property is sold for more than its calculated depreciated value.

Property Taxes

Remember the bit about death and taxes? Here it is again. Even your investment properties are subject to property taxes. However, these are considered an expense and can be deducted from your total taxable income.

Utilities You Cover

As the property owner, you have the option of covering all or some of the utilities on behalf of your property rather than expecting the tenant to do so. This is considered an operating expense that can be deducted from your tax expenses.

It also allows you to charge more for rent and ensure that everything is always paid on time, and avoid the risk of utilities getting shut off.

Property Management Fees

If you work with a property management company to manage the property on your behalf, their monthly fees are another tax deduction. If you manage the property yourself, any fees associated with management expenses, such as paying for background checks and advertising, are also tax deductible.

A pesky necessary expense, HOAs ensure your property’s long-term value and keep the neighborhood desirable. The good news is that HOA membership dues are tax deductible.
Tenant-Related Deductions

Legal Eviction Fees

Eviction is one of the least desirable elements of rental property ownership. While they’re the exception rather than the rule, they do still occur. And they can be expensive. There may be fees for legal counsel and court fees associated with an eviction, both of which qualify as tax deductions.
Administrative Deductions

Marketing and Advertising Expenses

Advertising and promoting your vacancies is a necessary expense to fill your rental properties with qualified tenants. As such, they’re considered a necessary operating expense and can be deducted from your total taxable income.

Home Office or Office Space Expenses

Whether you work from a home office or wherever you are on the road, this tax deduction benefit could cover a portion of a myriad of expenses. Internet, cell phone plans, rent, office utilities, and even a portion of your primary residence home insurance are all possible deductions.

Employee and Contractor Wages

A successful and scalable rental property investor is one with a team. And this team comes with expenses, including wages, social security, health insurance, and other benefits. Whether they’re W-2 employees or contractors, these expenses are tax deductible.

Professional Services

Paying for professional services and consultants can be a tax-deductible expense. This includes attorney fees, accountants, tax advisors, and other professional services.
Subscriptions and Software Tools

In our digital age, if it can be done at all, it can be done better with software or automated with the right tools. But these tools come with a price tag. Rental property tax deductions could cover some are all of these expenses, including cloud storage, social media tools, project management apps, trade publications, and many of the day-to-day tools you use to operate the business.

Other Possible Rental Property Tax Deductions

Tax Deductions For Using Personal Items

If you use any personal equipment or tools for business purposes, you may be required to pay property taxes based on the value of your property. The IRS website outlines at what rate personal property can be depreciated.[1] For example, appliances and furniture are depreciated over a five-year timeline, while exterior assets like driveways and fencing depreciate over a 15-year timeline.

Teifke Real Estate: The Full-Stack Investment and Property Management Team

Owning and operating a rental property is one of the most effective strategies for generating passive income. It’s even more profitable when you stay informed on the rental property tax deductions available to you.