Rental Property Tax Deductions: The Complete Checklist
Rental income is taxable, but the tax code gives landlords one of the most generous deduction menus of any small business. Miss categories and you overpay. Claim things that aren't deductible and you invite an audit. Here's the complete checklist, straight from IRS Publication 527.
The golden rule: ordinary and necessary
Every deduction on this list has to be ordinary and necessary for your rental activity. You generally deduct expenses in the year you pay them (cash basis — which is how most individual landlords file).
Not deductible, ever:
- Mortgage principal payments (only the interest)
- The value of your own labor
- Uncollected rent (cash basis — you never reported it as income, so there's nothing to deduct)
- Lost rental income during vacancies
The full Schedule E checklist
These are the expense categories straight from IRS Publication 527:
- Advertising — listing fees, yard signs, photography for your rental ads
- Auto and travel — trips to the property, to the hardware store, to meet contractors. 2025 standard mileage rate: 70 cents per mile. Keep a mileage log.
- Cleaning and maintenance — turnover cleaning, landscaping, pest control, snow removal
- Commissions — leasing commissions paid to agents
- Depreciation — the building itself (27.5 years residential), appliances, carpeting, fencing. See the depreciation notes below.
- Insurance — landlord dwelling policy, umbrella policy, liability coverage. (If you prepay a multi-year premium, you can only deduct the portion covering the current year.)
- Interest — mortgage interest (Form 1098), plus interest on loans used for the rental. Not deductible: interest on loan proceeds you cashed out and used for non-rental purposes.
- Legal and professional fees — eviction attorneys, lease review, tax prep fees for Schedule E
- Management fees — property manager commissions, paid to others (not yourself)
- Points — loan origination points are prepaid interest: generally deducted over the life of the loan, not all at once
- Repairs — fixing a leak, repainting, patching drywall. Deducted in the year paid.
- Taxes — property taxes, and the 2025 SALT cap is $40,000 ($20,000 married filing separately)
- Utilities — any utilities you pay: water, trash, common-area electric
Depreciation and the 2025 changes
Two updates from IRS Publication 527 (2025) that change the math:
- 100% bonus depreciation is back. For qualifying property acquired and placed in service after January 19, 2025, you can deduct the full cost in year one. This covers shorter-life improvements — appliances, carpeting, fencing, paving — not the building itself.
- Section 179 limit is $2,500,000 for tax years beginning in 2025.
Structural improvements (new roof, new HVAC) still go on the 27.5-year depreciation schedule.
De minimis safe harbor: if you elect it, you can expense items up to $2,500 per invoice ($5,000 with audited financial statements) instead of capitalizing them — handy for that $1,800 water heater. Elect it on your return each year.
Income most landlords forget to report
The IRS is clear that rental income isn't just the monthly check:
- Advance rent — last month's rent collected upfront is income in the year you receive it, not the year it covers
- Security deposits you keep — if you keep part of a deposit for damages, that amount is income in the year you keep it (a refundable deposit you plan to return isn't income)
- Tenant-paid expenses — if the tenant pays your repair bill and deducts it from rent, that amount is rental income to you (and you deduct the repair)
- Lease-cancellation payments — money a tenant pays you to break a lease is rent
Passive loss limits (the fine print)
Rental real estate is generally a passive activity. If your expenses exceed your rental income, the excess loss usually can't offset your W-2 income — with one big exception: if you actively participate (approve tenants, set rents, approve repairs), you can deduct up to $25,000 of rental losses against ordinary income, phasing out between $100,000 and $150,000 of modified AGI. Real estate professionals play by different rules entirely — that's a CPA conversation.
The bottom line
Work through every category on this checklist at tax time — advertising through utilities — and check whether the 2025 bonus depreciation rules let you expense improvements instead of depreciating them. The landlords who overpay taxes aren't the ones with complicated returns; they're the ones who forgot whole categories existed. When in doubt, ask your CPA before you file.
Source: IRS Publication 527 (2025), Residential Rental Property — irs.gov/publications/p527