Rental property tax deductions checklist

Most costs of running a long-term rental are deductible in the year you pay them, as long as they are ordinary and necessary for managing, conserving or maintaining the property. The work is in the exceptions. Improvements are depreciated, loan points are spread over the loan, principal is never an expense, some purchase costs go into basis, personal use splits the bill and loss limits can push a deduction into a later year.

This checklist maps common rental costs to their usual federal treatment and to the records that support them. It is general US federal education for long-term residential rentals, not tax advice. The IRS sources quoted are the 2025 editions, written for 2025 returns. Rules and amounts for 2026 returns can change, state rules differ, and short-term rentals, rentals with substantial services and entity-owned property have extra rules not covered here. Have a qualified tax professional review your return.

Sort every cost into one of five buckets

1. Deduct in the year paid. Ordinary operating costs such as advertising, cleaning and maintenance, repairs, current-year insurance, property taxes, management fees, utilities you pay and mortgage interest. Most individuals use the cash method, so they generally deduct rental expenses in the year they pay them (IRS rental tips).
2. Capitalize and depreciate. The building, improvements and longer-lived items such as appliances and carpeting. You recover their cost over several years on Form 4562.
3. Spread over time. Insurance paid for more than one year of coverage, prepaid interest and loan points charged for the use of money.
4. Add to basis. Certain purchase and loan costs, such as recording fees, title insurance, transfer taxes, mortgage commissions and abstract fees (IRS Publication 527). Basis drives your depreciation and your gain when you sell.
5. Leave out. Loan principal, the personal-use share of a cost, rent you never collected as a cash-method owner, transfers into your own reserve account and a refundable deposit you are holding.

Expense treatment map

Use this map to label each line in your ledger before year-end. The treatments come from Publication 527 and the 2025 Schedule E instructions.

Cost	Usual federal treatment	Evidence to keep
Advertising, cleaning, supplies, management fees, utilities you pay	Deduct in the year paid	Invoices, owner statements, utility bills
Repairs, such as fixing a broken lock or painting a room	Deduct in the year paid	Invoice that describes the work
Improvements, such as a new roof, an addition or a whole new HVAC system	Capitalize and depreciate	Invoice, scope of work, date placed in service
Mortgage interest	Deduct the rental share	Form 1098 and the lender's annual statement
Mortgage principal	Not deductible	Lender statement showing the split
Points charged only for the use of money	Deduct over the life of the loan	Closing disclosure
Mortgage commissions, abstract fees and recording fees for the loan	Add to basis	Closing disclosure
Insurance	Deduct the part that covers each year	Declarations page and payment record
Property taxes	Deduct when paid; seller's back taxes you agree to pay at purchase without reimbursement go into basis	Tax bills, escrow statement, settlement statement
Local assessments for streets, sidewalks or sewer systems	Add to basis; the part for maintenance or interest is deductible	Assessment notice
Tax preparation for the rental part of your return	Deduct	Preparer invoice
Legal fees to defend or protect title	Add to basis	Attorney invoice
Local trips to collect rent or maintain the property	Deduct; commuting from home is generally not deductible	Mileage log with dates and purpose
Travel away from home mainly to manage or maintain the rental	Deduct, split between rental and other purposes; not deductible if the main purpose is improving the property	Itinerary and receipts kept under Pub. 463 rules
The building	Depreciate; residential rental buildings use 27.5 years under the general system	Settlement statement and land-building allocation
Land	Not depreciable	The same allocation
Appliances, carpeting and furniture in the rental	Depreciate as 5-year property unless another rule applies	Invoice and date placed in service

Money in that is income, and money in that is not

The income side needs the same sorting. These rules come from Publication 527 and assume the cash method.

Money received	Usual federal treatment
Normal rent	Income when received
Advance rent, such as last month's rent collected up front	Income in the year received, whatever period it covers
Security deposit you plan to return	Not income when received
Part of a deposit you keep because the tenant broke the lease terms	Income in the year you keep it
A "deposit" meant to be the final rent payment	Advance rent, so income when received
A tenant's payment to cancel the lease	Rent
A bill the tenant pays for you and deducts from rent	Income, and deductible if it is a deductible rental expense
Services in place of rent, such as painting	Income at fair market value, with the same amount deductible if it is a deductible expense

Repairs or improvements

This is the classification that moves the most money between this year and later years. Repairs keep the property in ordinarily efficient operating condition. Under Publication 527, a cost is an improvement, and must be capitalized, when it results in one of these:

• A betterment. Fixing a pre-existing defect, enlarging or expanding the property, or increasing its capacity, strength or quality.
• A restoration. Replacing a substantial structural part, rebuilding to like-new condition, or repairing damage after you adjusted basis for a casualty loss.
• An adaptation. Altering the property to a use that does not match its intended ordinary use when you began renting it.

Three elections in the IRS tangible property regulations can let you deduct some costs that might otherwise be capitalized. Each one has conditions.

• De minimis safe harbor. Without an applicable financial statement, you can deduct items or invoices of up to $2,500 each. You must follow a consistent expensing policy that exists at the start of the year and attach an election statement to a timely filed original return, including extensions.
• Routine maintenance safe harbor. Recurring work that keeps a building in ordinarily efficient operating condition, which you reasonably expected to perform more than once in the 10 years after the building was placed in service.
• Safe harbor for small taxpayers. For owners with average annual gross receipts of $10 million or less and a building with an unadjusted basis of $1 million or less. The year's repairs, maintenance and improvements on that building must total no more than the lesser of 2% of its unadjusted basis or $10,000. You elect it by statement, year by year.

Ask your preparer whether these elections fit your situation. Either way, keep improvement invoices in their own list. Publication 527 notes you need those costs when you depreciate or sell.

A fictional classification exercise

Every item below is invented for practice. None are Vidit's records. The "likely bucket" column is a starting point for a conversation with your preparer, not a conclusion.

Fictional item	Likely bucket	Why
$180 to replace a broken lock	Deduct this year	Schedule E instructions use fixing a broken lock as a repair example
$9,000 to replace the entire HVAC system	Capitalize and depreciate	Schedule E instructions use this as an improvement example
$1,000 mortgage payment: $650 interest, $350 principal	Deduct $650 as interest; the $350 is not deductible	Principal is not a rental expense
$1,500 premium covering three years	About one third for each year of coverage	Pub. 527 limits the deduction to each year's share
$2,000 refundable deposit received	Not income	You plan to return it
$1,300 water heater replacement	Review	The answer depends on the facts and on whether you made a safe harbor election

Depreciation basics

Depreciation starts when the property is ready and available for rent, not when the first tenant moves in. Split the purchase cost between land and building in proportion to their fair market values when you buy. Only the building part is depreciated.

Residential rental buildings, and structural components such as furnaces and water pipes, use a 27.5-year recovery period under the general depreciation system. Additions and improvements generally use the same recovery period as the property they improve.

Claim the correct amount each year. If you skip depreciation you were entitled to, you still reduce your basis by the amount you could have deducted. For 2025, Publication 527 also reports that the 100% special depreciation allowance was restored for qualified property acquired and placed in service after January 19, 2025, while earlier property stays under the prior phase-down rules. Form 4562 and its instructions set out which items qualify. Supermode's rental property depreciation guide walks through basis and the calculation in more detail.

Personal use and family rentals

If you or your family use the unit, divide expenses between rental and personal use. Publication 527 treats you as using a dwelling unit as a home if personal use exceeds the greater of 14 days or 10% of the days it is rented at a fair rental price. That status can limit your rental deductions. If you use it as a home and rent it for less than 15 days in the year, do not report the rent, and the expenses are not rental expenses.

A day a family member uses the unit counts as personal use unless they use it as their main home and pay a fair rental price. A day spent working substantially full time on repairs and maintenance, not improvements, does not count as personal use.

Loss limits that can delay a deduction

An allowed deduction can still be limited in the year it arises. Rental real estate is generally a passive activity, and passive losses generally offset only passive income. Two rules matter most for owners with salaries (Publication 925):

• The $25,000 special allowance. If you actively participate, you may deduct up to $25,000 of rental loss against nonpassive income such as wages. Active participation means you own at least 10% and make management decisions such as approving tenants, setting rental terms or approving expenses. The allowance shrinks by 50% of modified adjusted gross income above $100,000 and is generally gone at $150,000. Married people filing separately who lived apart all year use $12,500, with a phaseout from $50,000 to $75,000.
• Carryforwards. Losses you cannot use carry forward to later years. In Publication 925's example, an owner with a $31,000 rental loss and $120,000 of modified adjusted gross income deducts $15,000 and carries $16,000 forward.

Real estate professional status, the at-risk rules on Form 6198 and the business interest limitation can also change the result. These are preparer questions, not ledger questions.

Year-end evidence checklist

Collect these for each property before you meet your preparer.

1. A ledger reconciled to every bank statement. The rental property expense spreadsheet has a copyable layout and a month-end check.
2. Form 1098 and the lender's annual statement, with interest, principal and escrow separated.
3. Property tax bills and proof of payment, including what the escrow account actually paid. Track escrow deposits apart from the bills escrow pays, so the same cost is not counted twice.
4. Insurance declarations pages showing each policy's coverage dates.
5. Repair invoices that describe the work, plus a separate list of possible improvements with costs and placed-in-service dates.
6. The settlement statement for any purchase or refinance this year, and your support for the land and building split.
7. The prior year's depreciation schedule or asset list.
8. A mileage log and travel records with dates and purpose.
9. Days rented at a fair rental price and days of personal or family use, for each unit.
10. A security deposit log showing amounts received, held, returned and kept.
11. Contractor payment totals. Schedule E asks whether you made payments that require Forms 1099, so check the current year's Form 1099 instructions.
12. Ownership percentages for co-owned property, and records showing how any cash-out refinance proceeds were used. Interest on refinance proceeds not used for the rental generally is not a rental expense.
13. Damage, insurance claim and reimbursement records. The landlord insurance claim checklist covers that documentation.

Common questions

Can I deduct costs before my first tenant moves in?

Publication 527 says you can deduct ordinary and necessary expenses for managing, conserving or maintaining a rental from the time you make it available for rent. List earlier costs and purchase costs separately for your preparer, because other rules apply to them.

Can I deduct rent I lost while the unit was vacant?

No. While you hold the property for rent, you may be able to deduct ordinary expenses, including depreciation, during a vacancy. Lost rental income itself is not deductible.

Is my whole mortgage payment deductible?

No. Only the interest is deductible, and only the rental share. Principal is not a rental expense, and points are usually spread over the loan term.

Do I have to claim depreciation?

You should claim the correct amount each year. Your basis drops by the depreciation you were entitled to whether or not you claimed it, which affects your gain when you sell. The guide to selling a rental property covers the sale side.

Can I deduct trips to my out-of-state rental?

Travel away from home can be deductible when the primary purpose is to collect rent or to manage, conserve or maintain the property, split between rental and other activities. A trip mainly to improve the property is recovered through depreciation instead. The out-of-state investing guide covers managing from a distance.

Sources checked October 23, 2026: Publication 527 (2025), 2025 Instructions for Schedule E, Publication 925 (2025), the IRS rental income and deductions tips and the IRS tangible property regulations FAQ. Confirm the editions for the tax year you are filing before relying on any figure.