Landlord tax deductions: what small landlords can actually write off

Rental real estate is one of the most tax-advantaged investments in the U.S. tax code — but only if you actually track and deduct what you're entitled to. Most first- and second-year landlords overpay because they don't realize how broad the deductible categories are.

Where rental income and expenses live on your return

For a U.S. individual landlord owning property directly or through a single-member LLC, rental income and expenses are reported on Schedule E (Form 1040), one column per property. You report gross rents received, then subtract operating expenses and depreciation.

Deductible operating expenses

• Mortgage interest on the rental (not principal).
• Property tax.
• Landlord insurance (DP-3 or similar), umbrella allocated to rentals, and flood insurance.
• Repairs and maintenance — anything that keeps the unit in working order: plumbing fixes, painting, appliance repair, HVAC service, lawn care, pest control, snow removal.
• Utilities you pay (water, sewer, trash, sometimes electric or gas during vacancies).
• HOA / condo fees.
• Management and professional fees — property manager, attorney, CPA, software (yes, PLINTH counts), tax-prep fees allocated to the rental.
• Advertising and listing fees.
• Tenant screening (credit, background, eviction reports).
• Travel and mileage to inspect, show, or service the property (IRS standard mileage rate).
• Office supplies and a home-office deduction if you have a dedicated space used regularly and exclusively for managing rentals.
• Bank fees on the rental account; merchant fees on rent payments.
• Education — books, courses, and conferences related to your existing rental business.

The big one: depreciation

The IRS lets you depreciate residential rental buildings over 27.5 years on a straight-line basis. The land itself is notdepreciable, so on a $400,000 purchase where the county assesses the land at $80,000 and the building at $320,000, your annual depreciation deduction is roughly $320,000 / 27.5 ≈ $11,636. That's a non-cash deduction that often turns a profitable rental into a paper loss for tax purposes.

Major improvements (new roof, full kitchen remodel, HVAC replacement) are capitalized and depreciated separately on their own schedule, not deducted in one year.

Repair vs. improvement (the most-missed distinction)

A repair restores the property to its existing condition and is deductible in full this year: patching drywall, replacing a broken window, fixing a leaky faucet. An improvement betters, restores, or adapts the property and must be capitalized and depreciated: a brand-new roof, adding a deck, a full kitchen remodel. Categorize correctly — getting this wrong is a common audit issue.

Pass-through deduction (QBI)

Rental income can sometimes qualify for the 20% Qualified Business Income deduction if your activity rises to the level of a "trade or business." The IRS safe harbor (Rev. Proc. 2019-38) requires 250+ hours of rental services per year and contemporaneous records. Talk to a CPA before claiming this.

Records to keep

• Closing disclosure / settlement statement at purchase and refinance.
• Mortgage interest statements (Form 1098).
• Every receipt, invoice, and contractor bill (digital is fine).
• Bank and credit-card statements for the rental account.
• Mileage log (date, purpose, miles).
• Lease agreements and rent ledger.

The IRS generally has 3 years to audit (6 if income is materially underreported). Keep records at least 7 years to be safe.

How PLINTH helps at tax time

PLINTH's per-property payment ledger and expense tracking give you a clean export of rent received and expenses paid, organized by property — exactly what your CPA needs to fill out Schedule E without guessing.

This is general education, not tax advice. Federal and state tax rules change and depend on your specific situation. Work with a CPA who has rental-property experience.