What Can I Write Off as a Landlord: Repairs, Depreciation, QBI

As a landlord, you can claim tax deductions for almost every ordinary cost of owning and running a rental: mortgage interest, property taxes, insurance, repairs, utilities you cover, property management fees, travel to the property, depreciation on the building and its contents, professional fees, and a 20 percent pass-through deduction on your net rental profit. The bigger question is usually not what qualifies but how much of a rental loss you can actually use in the current year, because passive activity rules cap losses for most owners with day jobs.

The Everyday Operating Expenses

Any expense that is ordinary in the rental business and helpful for managing the property reduces your taxable rental income.¹ The list is long, and most landlords underclaim rather than overclaim.

Property management fees, typically 8 to 12 percent of monthly rent.
Landlord insurance premiums for the current year (prepaid multi-year policies get spread out).²
Utilities you pay on behalf of the property — water, gas, electricity, trash, internet.
Legal and accounting fees for leases, evictions, rental tax prep, and related disputes.²
Advertising: listing fees, yard signs, classifieds to find tenants.
Local rental permits and landlord registration fees.

Mortgage interest on a loan used to buy, build, or improve the property is deductible; principal is not.³ Points paid on a rental mortgage do not come off in year one the way they can on a personal residence — you amortize them over the loan term.⁴ A $4,000 origination fee on a 30-year loan works out to roughly $133 each year. Small, easy to forget, worth claiming. Other upfront closing costs like abstract and recording fees are not interest at all; they add to your cost basis in the property.²

Real estate taxes on the rental come off in full against rental income. The SALT cap that limits state and local taxes on Schedule A does not apply here — rental property taxes go on Schedule E as a business expense, with no cap. If you buy or sell mid-year, the deduction is split between buyer and seller by days owned.⁵

Travel and Vehicle Use

Driving to the property to collect rent, meet a contractor, show the unit, or handle a repair is deductible business travel. Pick one of two methods for the year: the IRS standard mileage rate (72.5 cents per mile for 2026)⁶ or the business percentage of actual costs — fuel, insurance, repairs, registration, and vehicle depreciation.⁷ You cannot mix the two. A log with date, destination, purpose, and miles is enough support. Overnight trips to distant rentals bring lodging and a portion of meals into the deduction. Local commuting from home to a property you manage does not qualify.

Home Office

If you run the rental business from a room used exclusively and regularly for management work, you can deduct a share of your home expenses based on square footage, or use the simplified $5 per square foot rate up to 300 square feet ($1,500 maximum).⁸ The space must be your principal place of administrative work for the rentals.

Repairs vs. Improvements: The Line That Matters

Routine repairs are deductible in the year you pay for them. Patching drywall, fixing a leaky pipe, replacing a broken garbage disposal, repainting between tenants — all deductible immediately.² Improvements are not. A new roof, a kitchen remodel, adding a bathroom, or replacing a major system has to be capitalized and depreciated over years.

The IRS sorts improvements into three buckets: betterments (fixing a preexisting defect, expanding the property, or increasing capacity), restorations (replacing a major structural component or rebuilding to like-new condition), and adaptations (converting a space to a use inconsistent with its original purpose).² If the expense fits none of those, it is almost certainly a deductible repair.

For smaller purchases where the label is genuinely unclear, use the de minimis safe harbor. Elect it on your return and you can expense any item costing up to $2,500 per invoice or per item without arguing about whether it was a repair or an improvement.⁹ A $2,200 water heater comes off the current year in full. This is one of the most underused write-offs available to smaller landlords.

Depreciation on the Building and Its Contents

You can’t deduct the purchase price of a rental in one shot, but you recover it through depreciation. Residential rental buildings are depreciated straight-line over 27.5 years.¹⁰ Land does not depreciate because it doesn’t wear out, so you split the purchase price between land and structure, usually using your local property tax assessment ratio or an appraisal. Major capital improvements — a roof, an HVAC system — start their own 27.5-year schedule from the date placed in service.²

Contents are a different story. Appliances, carpeting, and window treatments have five- or seven-year recovery periods, which makes them eligible for 100 percent bonus depreciation under the One, Big, Beautiful Bill for property acquired after January 19, 2025.¹¹ A $3,000 refrigerator placed in service in 2026 can be written off entirely that year rather than spread across five.

Depreciation is not free money. When you sell, every dollar of depreciation you claimed comes back as unrecaptured Section 1250 gain taxed at a federal rate of up to 25 percent, regardless of how long you owned the property. If your ordinary bracket is lower, you pay at the lower rate. High-income sellers may also owe the 3.8 percent net investment income tax. Skipping depreciation deductions does not help you avoid recapture either: the IRS calculates it based on the depreciation you were allowed to take, not just what you actually claimed.

The Passive Activity Loss Cap

This is the surprise that ambushes most new landlords. By default, rental real estate is a passive activity, and passive losses can only offset passive income — not wages, salary, or active business earnings.¹² Losses beyond your passive income get suspended and carried forward until you have passive income to soak them up, or until you sell the property.

There is a partial escape. If you actively participate in the rental — approving tenants, setting rents, authorizing repairs — you can deduct up to $25,000 in rental losses against non-passive income each year. Active participation is a lower bar than material participation, and most hands-on owners clear it.¹²

The $25,000 allowance phases out with income. It drops by 50 cents for every dollar of modified AGI above $100,000, and disappears entirely at $150,000.¹³ Married taxpayers filing separately who lived together during the year get a reduced $12,500 allowance phasing out at $50,000.

The passive limits vanish entirely if you qualify as a real estate professional. That requires more than 750 hours during the year in real property trades or businesses where you materially participate, and those hours must represent more than half of all personal services you perform across every job and business. On a joint return, one spouse must meet the test alone, without borrowing the other’s hours. Owners with full-time non-real-estate careers rarely qualify.

The 20 Percent Pass-Through Deduction

Beyond the direct expense deductions, most landlords also get a 20 percent deduction on their qualified business income from the rental.¹⁴ The One, Big, Beautiful Bill made this deduction permanent in 2025 at the 20 percent rate. If your rental nets $50,000 after every other deduction, Section 199A can knock another $10,000 off your taxable income.

Whether a specific rental counts as a qualified trade or business is fact-dependent, but Revenue Procedure 2019-38 offers a safe harbor that removes the ambiguity: 250 hours of rental services per year — collecting rent, managing tenants, handling maintenance, bookkeeping — plus contemporaneous time logs and separate books for each enterprise.¹⁵ For properties operating at least four years, you need to meet the 250-hour bar in any three of the past five tax years. Rental real estate is generally not a specified service business, so the deduction is available regardless of income level for most landlords.

Reporting Rules That Can Erase Your Deductions

Security Deposits

A refundable damage deposit is not income when received — you owe it back. It becomes income the moment you keep any part of it. Keep some to fix tenant damage: report that amount as income and deduct the repair. Keep it because the tenant broke the lease: report it as income in the year retained. If the lease designates the deposit as the final month’s rent, it is advance rent and counts as income the day you receive it, not the day it gets applied.¹

Form 1099-NEC for Contractors

If you pay any unincorporated service provider $600 or more in a year — plumber, electrician, handyman, property manager — you have to file Form 1099-NEC reporting the payments.¹⁶ Payments to corporations are generally exempt. Penalties for missing 1099s scale by how late you are and can reach $680 per form for intentional disregard, with no annual cap.¹⁷ Get a W-9 from every contractor before the first check goes out.

Personal Use of the Property

Using the rental yourself — including short vacations — limits your deductions. Split expenses between rental and personal days. If personal use exceeds the greater of 14 days or 10 percent of the days rented at fair market rent, your rental deductions cannot exceed your rental income from that property.¹⁸ No deductible loss from a property you also treat as a retreat.

Records

Every deduction depends on documentation. Keep receipts, invoices, and bank statements for at least three years after filing — six if you suspect income was underreported. For depreciation, hold the closing statement, any cost-segregation study, and improvement records for as long as you own the property plus three years after the sale return. A dedicated bank account and credit card for the rental is the single change that prevents the most audit losses; commingled personal and business spending puts the entire burden of separation on you.

1
Internal Revenue Service. Topic No. 414, Rental Income and Expenses
2
Internal Revenue Service. Publication 527 (2025), Residential Rental Property
3
Office of the Law Revision Counsel. 26 USC 163 – Interest
4
Internal Revenue Service. Topic No. 504, Home Mortgage Points
5
Office of the Law Revision Counsel. 26 USC 164 – Taxes
6
Internal Revenue Service. 2026 Standard Mileage Rates
7
Internal Revenue Service. Publication 463 (2025), Travel, Gift, and Car Expenses
8
Internal Revenue Service. Topic No. 509, Business Use of Home
9
Internal Revenue Service. Tangible Property Final Regulations
10
Office of the Law Revision Counsel. 26 USC 168 – Accelerated Cost Recovery System
11
Internal Revenue Service. Treasury, IRS Issue Guidance on the Additional First Year Depreciation Deduction Amended as Part of the One, Big, Beautiful Bill
12
Office of the Law Revision Counsel. 26 USC 469 – Passive Activity Losses and Credits Limited
13
Internal Revenue Service. Publication 925 (2025), Passive Activity and At-Risk Rules
14
Office of the Law Revision Counsel. 26 USC 199A – Qualified Business Income
15
Internal Revenue Service. Revenue Procedure 2019-38 – Rental Real Estate Enterprise Safe Harbor
16
Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
17
Internal Revenue Service. Information Return Penalties
18
Internal Revenue Service. Rental Income and Expenses – Real Estate Tax Tips