Tax Deductions for Rental Property

Tax deductions for rental property

What tax deductions for rental property can I take?

The video below shares a list of deductible items for Schedule E (Rental Property).

Generally, the largest tax deductions for rental property are:

•       Mortgage Interest

•       Real Estate Taxes

•       Homeowner’s Insurance

•       Cleaning and Maintenance

•       Repairs

•       Management Fees

•       Depreciation

Mortgage Interest

•       You cannot deduct mortgage payments (you must depreciate instead). However, you do get to deduct mortgage interest, which is usually the largest part of mortgage payments in the early years of a loan.

•       Normally found on Form 1098 sent out by the Mortgage company in January.

Real Estate Taxes and Homeowners Insurance

•       Real Estate Taxes also appear on Form 1098 if handled through an Escrow account.

•       Homeowner’s insurance is deductible for rental properties (unlike your personal residence).   Note: This is not normally reported on form 1098. So you may have to check with your insurance company to find out the amount.

Cleaning and Maintenance

•       Any maintenance fees paid by owner

•       Yard care, etc.


  • As many have found out the hard way, this can be a huge rental expense.
  • What happens if you use a management company and they take it out of your rent?
  • Report the full amount of rent as rent income
  • Deduct appropriate amounts for repairs and maintenance
  • Many homeowners use a rental management company that charges monthly fees (often 10% of the rent)
  • These management fees are deductible

Management Fees

  • Many homeowners use a rental management company that charges monthly fees (often 10% of the rent)
  • These management fees are deductible


•       Residential rental property is depreciated over 27.5 years

•       You Depreciate the property rather than deducting principal payments

•       Your cost basis is the full amount you paid for the property, plus any improvements you made to it prior to renting

•       Note: you should take allowable depreciation. When you sell, the IRS reduces the basis by the amount you could have taken, whether you take it or not!

Limits on losses

  • You can generally deduct up to 25,000 in losses per year
  • Taxpayers making over 100,000 have additional limits on what they can deduct.
  • Taxpayers making over 150,000 cannot deduct losses in current year.
  • NOTE: You do not lose these losses. They carry over until you can deduct them! Either in a future year or the year you dispose of the property.

Other possible deductions:

  • Legal Fees
  • Mileage or Travel Expenses (Standard mileage rate is 56 cents per mile for 2014)
  • Supplies (if not included in repairs)
  • (Homeowner Association) HOA fees
  • Utilities – if paid by owner
  • Any other expenses paid by owner associated with rental property

For More Information

  • Contact Derland Bahr CPA at 254-432-5724 or visit to learn more about tax deductions for rental property.