Rental property tax deductions: the landlord's checklist
7 min read
Every dollar you can legitimately deduct is a dollar of rental income you don't pay tax on. Most landlords leave money on the table not because they're reckless, but because their records can't back up the deduction. Here are the deductions that matter and how to document them so they stick. This is general education, not tax advice — confirm specifics with your CPA.
Mortgage interest and loan costs
The interest portion of your mortgage payment is deductible; the principal portion is not. That distinction matters, because your bank statement shows one lump payment — you need books that split each payment into interest, principal, and escrow so only the interest hits your expense report.
Points and certain loan fees are generally deducted over the life of the loan, not all at once. Keep your closing statement; it's the source document for these.
Depreciation — the deduction landlords forget
You can depreciate the building (not the land) over 27.5 years for residential rental property. On a $275,000 building that's roughly $10,000 a year of deduction you take without spending a dollar — but you have to track the property's cost basis and placed-in-service date to claim it.
Capital improvements (a new roof, an HVAC system) are depreciated too, separately from repairs. Getting the repair-versus-improvement call right is one of the highest-value things clean books do for you.
Repairs, maintenance, and supplies
Ordinary repairs that keep the property in working order — fixing a leak, repainting, replacing a broken appliance — are deductible in the year you pay them. Improvements that add value or extend the property's life get capitalized and depreciated instead.
Tag every repair to the property (and unit) it belongs to. When one invoice covers work at several buildings, split it by amount so each property's deductions reflect only its share.
Operating costs that add up
Property insurance, property taxes, management fees, HOA dues, advertising for vacancies, utilities you cover, bank and software fees, and legal or accounting fees are all deductible operating expenses. Individually small, together they're often thousands a year.
Software you use to run the rentals — including property-management and accounting tools — is itself a deductible business expense.
Travel, home office, and mileage
Miles driven to your properties for showings, inspections, repairs, or supply runs are deductible at the standard mileage rate; keep a simple log of date, purpose, and distance. Trips to the property are a commonly missed deduction.
If you manage your rentals from a dedicated space at home, you may qualify for a home-office deduction. The rules are specific, so document the square footage and exclusive use.
The pass-through (QBI) deduction
Many landlords whose rental activity rises to the level of a trade or business can deduct up to 20% of qualified net rental income under the qualified business income deduction. Whether your activity qualifies depends on facts like hours and recordkeeping, which is exactly why a real ledger helps.
This is an area where a CPA earns their fee — but you can only claim it if your income and expenses are clean and property-level.
The real key: books that back up every number
The IRS doesn't disallow deductions because they're wrong — it disallows them because you can't prove them. A double-entry ledger where every rent payment and expense posts automatically, tags to a property, and drills down to the source transaction is what turns a shoebox of receipts into a Schedule E you can defend.
Rentwelly keeps this ledger for you as you operate, so at tax time your per-property P&L, mortgage interest split, and 1099s are already done. See the related guide on Schedule E and 1099s for how it all comes together.
See it in your own books
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