Rental Property Deductions Checklist

07.31.26 11:24 PM By Michael D'Amato, CPA

Owning a rental property can be a great side hustle — but it also comes with tax rules that can get complicated quickly.

The good news? The IRS allows rental property owners to deduct many ordinary and necessary expenses connected to managing, maintaining, and operating rental property. The key is knowing what is deductible now, what must be depreciated over time, and what records you need to keep.

Most residential rental income and expenses are reported on Schedule E, unless you provide substantial services primarily for the tenant’s convenience, which may move the activity closer to Schedule C treatment.

The Big Picture

Rental property deductions generally reduce the amount of rental income subject to tax. IRS examples of deductible rental expenses include mortgage interest, real estate taxes, casualty losses, maintenance, utilities, insurance, and depreciation.

But here is the key point:

A rental property deduction is not just about whether you spent money. It is about why you spent it, when the property was available for rent, and whether the cost is a repair, maintenance expense, improvement, or personal expense.

Rental Property Deduction Checklist

1. Mortgage Interest

Mortgage interest paid on rental property is generally deductible as a rental expense. Be careful with refinances: if you refinance for more than the old loan balance, the interest tied to proceeds not used for the rental property generally may not be deductible as a rental expense.

Practical recommendation:

Keep Form 1098, closing statements, refinance documents, and proof showing how refinance proceeds were used.

2. Real Estate Taxes

Real estate taxes related to the rental property are generally deductible against rental income.

Practical recommendation:

Keep the annual property tax bill and proof of payment. If the property was partly personal and partly rental, allocate the expense between rental use and personal use.

3. Insurance

Rental property insurance is generally deductible. This may include landlord insurance, fire insurance, liability coverage, and other insurance directly connected to the rental activity.

Practical recommendation:

Keep the declarations page and payment history. If premiums are prepaid, confirm whether the deduction must be allocated over the coverage period.

4. Repairs and Maintenance

Repairs and maintenance are often deductible when they keep the property in ordinary operating condition and do not have to be capitalized. The IRS states that repair or maintenance costs may generally be deducted if they are not required to be capitalized.

Examples may include:

Fixing a leak
Repairing a broken appliance
Patching drywall
Painting an existing room
Replacing a small part
Routine cleaning and maintenance
Lawn care or snow removal for the rental property

Practical recommendation:

Save invoices that clearly describe the work performed. “Repair furnace ignitor” is much better documentation than “property work.”

5. Improvements

This is where many landlords get tripped up.

Repairs may be deductible now, but improvements usually must be capitalized and depreciated. The IRS says you must capitalize expenses that improve the rental property, including costs that result in a betterment, restoration, or adaptation to a new or different use.

Examples of improvements may include:

New roof
Room addition (painting the room is also capitalized)
Major kitchen remodel
New HVAC system
Structural upgrades
Major flooring replacement
Renovations that materially increase value or extend useful life

Practical recommendation:

Separate repairs from improvements in your bookkeeping. Do not lump a $12,000 renovation into “repairs” without review. That is exactly the type of item that can create tax problems later.

6. Depreciation

Depreciation allows rental property owners to recover the cost of income-producing property over time. The IRS states that depreciation begins when the property is ready and available for rent, not necessarily when the first tenant moves in.

Residential rental buildings are generally depreciated over 27.5 years under the General Depreciation System.

Important reminder: land is not depreciable because land generally does not wear out, become obsolete, or get used up.

Practical recommendation:

Your purchase price should be allocated between land and building. Only the building portion is depreciated.

7. Utilities

Utilities paid by the landlord may be deductible. This may include:

Water
Sewer
Electric
Gas
Trash collection
WIFI

8. Property Management Fees

Fees paid to property managers are generally deductible rental expenses. This may include monthly management fees, tenant placement fees, and leasing commissions.

Practical recommendation:

Keep the annual statement from the property manager and reconcile it to deposits received.

9. Advertising and Tenant Placement Costs

Advertising is one of the common rental expenses listed by the IRS.

This may include:

Online listing fees
Rental platform fees
Signs
Photography for rental listings
Tenant screening fees, if paid by the landlord

Practical recommendation:

Keep screenshots and invoices showing the property address and purpose of the advertising.

10. Legal and Professional Fees

Legal, accounting, bookkeeping, tax preparation, and other professional fees may be deductible when directly connected to the rental activity. The IRS includes legal and other professional fees among common rental expense categories.

Practical recommendation:

Ask professionals to separate rental-related work from personal tax or legal matters on invoices.

11. Auto, Mileage, and Travel

Auto and travel expenses may be deductible when the primary purpose of the trip is to collect rent or manage, conserve, or to repair or improve the rental property. However, overnight travel costs primarily for improvements is recoverable through depreciation (capitalized costs).

Practical recommendation:

Keep a mileage log that includes the date, destination, business purpose, and miles driven. “Trip to rental property for annual inspection” is stronger than “property visit.”

12. Cleaning and Maintenance

Cleaning and maintenance are common rental expenses listed by the IRS.

This may include:

Cleaning between tenants
Pest control
Lawn maintenance
Snow removal
Gutter cleaning
Routine servicing of HVAC or appliances

Practical recommendation:

Track recurring maintenance separately from capital improvements.

13. Supplies

Supplies used for rental property operations may be deductible. This may include keys, locks, smoke detector batteries, cleaning products, small tools, light bulbs, and other property-related supplies.

The IRS tangible property rules also include a de minimis safe harbor election, which may allow qualifying taxpayers to deduct certain lower-cost tangible property items, generally up to $2,500 per invoice or item for taxpayers without an applicable financial statement (AFS). With an AFS, the deduction is increased to $5,000 per invoice or item . The election must be made annually with a timely filed tax return.

Practical recommendation:

Keep receipts and discuss the de minimis safe harbor election with your tax preparer each year.

14. HOA and Condo Fees

HOA or condo association fees may be deductible when they relate to the rental property.

Practical recommendation:

Review the association statement. Special assessments for major improvements may need to be capitalized rather than deducted immediately.

15. Bank Fees and Software

Bank fees, bookkeeping software, rental management software, payment processing fees, and similar costs may be deductible if they are directly connected to the rental activity.

Practical recommendation:

Use a separate bank account for rental activity. It makes bookkeeping cleaner and tax preparation easier.

Watch Out for Personal Use

If you use the property personally, you may need to divide expenses between rental use and personal use. The IRS states that if a dwelling unit is used for both rental and personal purposes, expenses generally must be allocated between the two.

The "14-day rule": For personal and vacation homes, the IRS allows you to rent out your home for 14 days or fewer per year without having to report the rental income on your tax return. The rules become more complex for dedicated rental properties. If you are considering applying this rule to a property you primarily rent out, or if you are thinking about using it to rent your home to your own business, it's best to speak with a tax professional to ensure it's done correctly.

Practical recommendation:

Track rental days, personal-use days, repair days, and vacant days. These details matter.

Vacant Rental Property

A vacant rental property may still generate deductible expenses if it is held for rental purposes. The IRS states that ordinary and necessary expenses, including depreciation, may be deductible while rental property is vacant, but you cannot deduct lost rental income for the vacant period.

Practical recommendation:

Keep proof that the property was available for rent, such as listings, property manager records, emails, or advertising history.

Rental Losses May Be Limited

Rental losses are often subject to at-risk rules and passive activity loss rules. In general, rental real estate is treated as passive, and losses may be limited unless exceptions apply.

One important exception: if you actively participate in rental real estate, you may be able to deduct up to $25,000 of rental real estate losses against nonpassive income, subject to income limits.

Practical recommendation:

Do not assume every rental loss is immediately deductible. The deduction may be limited, suspended, or carried forward.

Simple Example

Assume you own a small rental property and receive:

Rental income: $24,000
Mortgage interest: $8,000
Property taxes: $4,000
Insurance: $1,200
Repairs and maintenance: $2,500
Utilities: $1,800
Property management fees: $1,920
Depreciation: $6,000

Your total rental expenses are $25,420.

That creates a rental loss of $1,420 before applying passive activity and at-risk rules.

This does not automatically mean the full loss is deductible against wages or business income. The passive loss rules must be reviewed.

Best Recordkeeping Practices

For rental property owners, documentation is everything.

Keep:

Closing statements
Mortgage statements and Forms 1098
Property tax bills
Insurance statements
Repair invoices
Improvement invoices
Mileage logs
Lease agreements
Security deposit records
Utility bills
Property manager reports
Bank statements
Before-and-after photos for major work
Rental listing history
Depreciation schedule

Final Thought

A rental property can be an excellent side hustle, but the tax rules are more detailed than many owners realize.

The goal is simple:

Report all rental income, capture legitimate deductions, separate repairs from improvements, track personal use, and keep excellent records.

Done correctly, your rental property books should tell the story clearly — what came in, what went out, what was deductible now, and what must be depreciated over time.

That is how you stay IRS-ready and make smarter decisions as a rental property owner.

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