Why tracking deductions matters
Every legitimate rental expense you can prove is a dollar off your taxable income on Schedule E. That's not a loophole—it's how the game is designed. Most small landlords still overpay because they treated receipts like optional fan fiction and only panicked in March.
This guide is a checklist of what usually belongs in those buckets. Not tax advice—your CPA has opinions about your boat and your LLC—but if you know what to track all year, tax season stops being a scavenger hunt through your personal checking account.
The basic rule: ordinary and necessary
The IRS wants expenses that are ordinary (normal for landlords—plumbers, insurance, not a solid-gold mailbox) and necessary (actually useful for running the place). If it's for the rental and it's not a capital improvement you're supposed to depreciate, it's probably on the menu.
Deductible expense categories
Mortgage interest
The interest portion of your mortgage payment is deductible. Your lender sends Form 1098 each January showing the prior year's interest. Only interest is deductible—the principal portion of your payment is not.
If you refinanced or took out a home equity loan to improve the rental, the interest on that loan is also deductible.
Property taxes
Real estate taxes paid to your city or county are fully deductible. If your lender pays property taxes through an escrow account, your 1098 or escrow statement shows what was actually disbursed.
Special assessments for local improvements (new sewer lines, street paving) may or may not be deductible—work with your accountant to determine whether they add to your property basis or are deductible as current expenses.
Insurance
Your landlord insurance premium (sometimes called dwelling fire or rental property insurance) is fully deductible. If you have umbrella coverage that includes the rental property, the portion attributable to the rental is deductible—your accountant can help allocate it.
Flood insurance, earthquake insurance, and other specialized coverage for the rental are also deductible.
Repairs and maintenance
Repairs that restore the property to its prior condition are deductible in the year you pay for them:
- Fixing a broken water heater
- Patching a leaky roof
- Replacing broken windows
- Repairing plumbing leaks
- Fixing broken appliances
- Patching drywall holes
Not deductible immediately: Capital improvements (see below).
Utilities
Any utilities you pay for the rental property are deductible:
- Water and sewer
- Gas and electric
- Trash collection
- Internet (if you provide it to tenants)
If the tenant pays utilities directly, you don't deduct them—you never incurred the expense.
Property management fees
If you hire a property manager, their monthly fee is deductible. If you self-manage, you cannot deduct a salary for yourself—that's not how rental income works for most small landlords (rental income is passive; you don't "pay yourself").
Advertising and marketing
Any costs to advertise your vacancy are deductible:
- Zillow, Apartments.com, or other listing site fees
- Craigslist paid posts
- Signage (for rent signs)
- Photography for listings
- Professional copywriting for ads
Legal and professional fees
Fees paid to professionals for rental-related services are deductible:
- Attorney fees (lease drafting, eviction, entity formation)
- Accountant fees for Schedule E preparation
- Bookkeeping services
- Property inspection fees
- Appraisal fees (in some contexts—check with your accountant)
Cleaning and landscaping
- Cleaning between tenants
- Ongoing lawn care or landscaping
- Snow removal
- Pest control
- Gutter cleaning
For guidance on setting aside reserves for these regular expenses, see our maintenance reserve calculator.
Auto and travel expenses
Miles driven for rental property purposes are deductible at the IRS standard mileage rate (67 cents per mile in 2024, adjusted annually). Deductible trips include:
- Driving to the property for inspections, showings, or repairs
- Meeting contractors or vendors
- Buying supplies or materials
- Driving to the bank to deposit rent checks
- Attending landlord education or real estate investment meetings
You must keep a mileage log: date, destination, purpose, and miles. Apps like MileIQ or a simple note on your phone at the time of each trip are sufficient.
Alternatively, you can deduct actual vehicle expenses (gas, maintenance, insurance, depreciation) allocated by the percentage of rental-related use, but the standard mileage rate is simpler for most landlords.
Supplies
Small items and materials used for routine maintenance:
- Light bulbs
- Cleaning supplies
- Small tools
- Hardware (screws, nails, caulk)
- Filters (HVAC, water)
- Keys and locks (for rekeying between tenants)
Not supplies: Appliances, furniture, or anything with a useful life exceeding one year—those are typically depreciated, not expensed immediately.
Home office
If you have a dedicated space in your home used exclusively and regularly for rental property management, you may qualify for a home office deduction. The exclusive-use test is strict—the space cannot also be used for personal purposes.
The deduction is calculated based on the square footage of the office as a percentage of your home, applied to home expenses like mortgage interest, utilities, insurance, and depreciation.
This is a complex deduction with specific rules. Work with your accountant to determine whether you qualify and how to calculate it.
Software and subscriptions
Software and services used specifically for managing your rental are deductible:
- Property management software (like ManorKeeper)
- Accounting software (QuickBooks, Wave, etc.)
- Tenant screening services
- Online rent payment processing fees
- Cloud storage for property documents
- Professional memberships (landlord associations, real estate investor groups)
Bank fees and credit card interest
- Bank fees for your rental property account
- Credit card processing fees for rent payments
- Interest on credit cards used for rental expenses
Not deductible: Personal credit card interest, even if you charged rental expenses to the card—only business credit card interest qualifies. Separate your rental expenses onto a dedicated business card if possible.
Education
Courses, books, seminars, or coaching related to rental property management or real estate investing may be deductible if they improve your skills in your current rental business. The IRS draws a line between education that maintains or improves existing skills (deductible) and education that qualifies you for a new trade (not deductible).
A weekend seminar on tenant screening or property tax strategies for landlords: generally deductible.
A multi-year degree program to become a licensed real estate agent: generally not deductible (it's qualifying you for a new profession).
Work with your accountant to evaluate whether specific education expenses qualify.
HOA or condo fees
If your rental property is a condo or part of a homeowners association, the monthly or annual HOA fees are deductible.
Special assessments for major repairs or improvements may be added to your property basis and depreciated rather than deducted immediately—ask your accountant.
Commissions and referral fees
If you pay a real estate agent a commission to find a tenant or lease the property, that fee is deductible.
What is NOT deductible (or deducted differently)
Principal portion of mortgage payments
Only the interest is deductible. Principal payments reduce your loan balance but are not a tax-deductible expense.
Capital improvements
Improvements that add value, extend useful life, or adapt the property to a new use must be capitalized and depreciated over time (typically 27.5 years, or shorter for certain components like appliances or flooring). They are not deductible immediately.
Examples: new roof, full HVAC replacement, kitchen remodel, adding a deck.
See our guide on capital improvements vs. repairs for details.
Depreciation
Depreciation is not a cash expense—it's a paper deduction based on the depreciable value of your property. You claim it annually on Form 4562 and carry it to Schedule E. This is one of the largest deductions available to landlords and should not be missed. Calculate your annual depreciation with our depreciation calculator.
See our guide on Schedule E for landlords for more on depreciation.
Personal use
If you use the rental property for personal purposes during the year (you or your family stay there), your deductions may be limited. The IRS has specific rules for mixed-use properties. If personal use exceeds 14 days or 10% of the total rental days (whichever is greater), the property is treated as a personal residence with limited deductions.
For pure rental properties with no personal use, all expenses are deductible (subject to the passive activity rules).
How to track deductions
The best system is the simplest one you'll actually use:
Open a dedicated rental account — All income and expenses flow through one account. Your bank statement becomes your primary record.
Log expenses as they happen — Weekly or monthly, record each expense with a category, brief description, and receipt.
Keep receipts — Photograph paper receipts immediately. Forward email invoices to a dedicated folder. Download PDFs when they're sent.
Track mileage in real time — Use an app or a running note on your phone. Reconstructing mileage from memory later is unreliable and hard to defend in an audit.
Reconcile monthly — Check that your ledger balance matches your bank balance. Find discrepancies while they're fresh.
Do this year-round, and tax prep becomes a summary exercise. Skip it for months, and you're reconstructing records under deadline pressure.
You might also like:
- Schedule E for landlords: what to deduct and how to stay ready year-round
- Capital improvements vs. repairs: how to classify rental property expenses
- Rental property bookkeeping basics for small landlords
ManorKeeper tracks all deductible rental expenses
ManorKeeper automatically categorizes income and expenses, tracks mileage, logs repairs vs. improvements, and generates Schedule E-ready reports. See how expense tracking works.