Rental Property Tax Deductions: 2026 Landlord Guide

Rental property tax deductions are the single biggest lever most landlords have on their after-tax return, and most owners leave money on the table simply because they don't know what qualifies. The IRS lets you deduct "the ordinary and necessary expenses for managing, conserving, and maintaining your rental property." Ordinary means common and accepted for the business; necessary means appropriate and helpful. In practice that covers far more than the mortgage: depreciation, repairs, insurance, travel, professional fees, and, since the 2025 tax law changes, a 20% deduction on qualifying rental income itself.

This guide walks through every major write-off available to U.S. rental owners for the 2026 tax year, what changed under recent law, and the traps that quietly cost landlords money. It's written for long-term rental owners who report income and expenses on Schedule E.

A quick note: This article is educational, not tax advice. Nomad builds software for landlords; we're not accountants, and rental tax situations vary by income, entity, and state. Confirm anything here with a licensed CPA or tax advisor before you file. That's especially true for the newer provisions, which have income limits and timing rules that depend on your specific return.

The rental property tax deductions checklist

Here's the short version. Every item below is expanded further down the page.

• Mortgage interest: deductible; loan principal is not.

• Property taxes: fully deductible as a rental expense on Schedule E (not subject to the $10,000 SALT cap).

• Depreciation: the structure written off over 27.5 years, plus 100% bonus depreciation on shorter-life components.

• Repairs and maintenance: deductible in the year you pay; improvements are depreciated instead.

• Advertising and marketing: listing fees, photos, signage, and software.

• Insurance: landlord (dwelling) policies and related coverage.

• Utilities: anything you pay rather than the tenant.

• Travel and transportation: mileage at the 2026 IRS rate, or actual costs.

• Professional and management fees: legal, accounting, screening, and platform or management fees.

• HOA and association dues.

• Home office and operating costs: supplies, bank fees, education, and software.

• The 20% QBI deduction: a deduction on qualifying net rental income itself.

Keep every invoice, receipt, and bank statement tied to the property. The deductions below add up fast, but only the ones you can document survive an audit.

1. Mortgage interest

If you financed the property, the interest on that loan is deductible, and for most owners it's the largest single write-off. You can also deduct interest on loans used to improve the property, points and origination fees paid to buy or refinance the rental, and interest on credit cards or other financing used strictly for rental-related purchases.

The one line that isn't deductible is the portion of each payment that goes toward loan principal. Principal repayment builds your equity; it isn't an expense. Your lender's year-end Form 1098 breaks out how much of the year's payments was interest.

Go deeper: The 11 not-so-noticeable property costs eating your profits covers the carrying costs owners routinely underestimate.

2. Property taxes

State and local property taxes on a rental are fully deductible as a business expense, and this is where the current tax code trips up a lot of owners. The widely discussed SALT cap (the limit on deducting state and local taxes, raised from $10,000 to $40,000 for 2025 under the One Big Beautiful Bill Act, and rising about 1% a year through 2029) applies only to personal itemized deductions on Schedule A. Property taxes on a rental you hold as an investment are a business expense reported on Schedule E, and they are not subject to the SALT cap at all.

That distinction has two practical consequences. First, you deduct rental property taxes in full even if they run well past $40,000. Second, you do not need to itemize to claim them. The deduction lives on Schedule E, so you get it whether you take the standard deduction or itemize on your personal return. If your jurisdiction charges a rental license or landlord registration fee (Boulder, Colorado is one example), that's deductible too.

3. Depreciation

Depreciation is the tax deduction that lets you recover the cost of the building over its useful life, even though you haven't spent new money in that year. The IRS treats residential rental buildings as wearing out over 27.5 years, so each year you deduct roughly 1/27.5 of the building's value using the straight-line method. You can start depreciating once the property is ready and available to rent, before a tenant is even in place.

Two rules matter. You depreciate the building, not the land, because land doesn't wear out, so you allocate your purchase price between the two and depreciate only the structure. And your depreciable basis is generally what you paid plus buying costs and capital improvements, not the current market value.

Bonus depreciation and cost segregation

The building depreciates slowly, but many components inside it don't have to. Under the One Big Beautiful Bill Act, 100% bonus depreciation is permanently back for qualifying property acquired after January 19, 2025. Bonus depreciation lets you deduct the full cost of eligible assets in year one instead of spreading it out.

The 27.5-year building itself doesn't qualify, but shorter-life components with a recovery period of 20 years or less do: appliances, carpeting and flooring, furniture, fixtures, and land improvements like fencing, walkways, and parking areas. A cost segregation study is the tool investors use to break a property into those components so more of the purchase price can be written off quickly. There's a timing trap worth flagging to your advisor: a property under a written binding contract signed before January 20, 2025 can be locked into the older, lower bonus rate even if you closed later.

Furnishing a rental is one place this shows up directly, because the furniture you provide is depreciable. That being said, Nomad’s leasing data indicates that furnished units get 67% fewer week-1 inquiries than unfurnished and they tend to stay on the market longer.

4. Repairs and maintenance

A repair keeps the property in working condition; an improvement makes it better, restores it, or adapts it to a new use. That line decides how you deduct the cost. Repairs are deducted in full in the year you pay them. Improvements are capitalized and depreciated over time.

Fixing a leaky faucet, repainting a room, patching drywall, or weather-sealing a door are repairs. IRS Publication 527 treats the following as improvements to be capitalized, not deducted as repairs:

• Room, bedroom, or bathroom additions

• New roofs

• New flooring

• Landscaping and sprinkler systems

• Security systems

• Adding or replacing HVAC systems

• Water heaters

• Insulation and storm windows

Labor counts. If you hire out the work, the contractor's labor is part of the deductible cost; if you do it yourself, you can't deduct the value of your own time, but you can deduct materials, tools, and equipment.

One rule saves a lot of paperwork: the de minimis safe harbor lets you expense items that cost $2,500 or less per item or invoice immediately rather than depreciating them, as long as you elect it on your return each year. That covers most appliances and small equipment.

5. Advertising and marketing

Getting a rental in front of tenants is a deductible cost of doing business. That includes syndication and listing fees, professional photography, yard signs, printed flyers, and the software and subscriptions you use to market and lease the home. (Note that a listing platform many older guides mention, HomeAway, was folded into Vrbo in 2020; the deduction is the same, only the name has changed.)

Marketing spend is worth doing well, not just deducting. Nomad's leasing data (July 2025) shows homes that lease within seven days draw more than 20 inquiries in their first week on the market, while homes that take 30 or more days typically see fewer than half that. The opening week is the window that decides how fast a home leases.

How Nomad handles this: Rental advertising syndicates your listing to 30+ sites, so you set the price and the software handles distribution.

6. Insurance

Premiums on a landlord policy are an ordinary and necessary expense, so they're deductible, including dwelling coverage, liability, loss of rents, and umbrella policies tied to the rental. You can generally deduct only the current year's premium in the year it applies; prepaying several years of coverage to inflate one year's deduction doesn't work, because the prepaid portion has to be spread across the years it covers.

Landlord insurance is not the same product as the homeowners policy you carried when you lived in the home, and coverage forms differ in what they pay for. Rather than guess, ask a licensed insurance agent to quote a landlord (dwelling) policy and confirm which form it is and whether loss-of-rents coverage is included. An agent licensed in your state is the right person to match coverage to your risk.

How Nomad handles this: Property protection covers resident-caused damage and liability, offered through a licensed partner.

7. Utilities

Any utility or service you pay for on the rental's behalf is deductible: water, sewer, gas, electricity, trash collection, internet, and cable. If the tenant reimburses you for a utility, that reimbursement is generally rental income, and you still deduct the expense, so it nets out. Where the tenant pays the utility company directly, there's nothing for you to deduct.

8. Travel and transportation

Driving that's genuinely for the rental business is deductible: trips for showings, rent collection, maintenance, cleanings, and emergency calls between the property and your other business locations. You have two methods. The standard mileage rate is set by the IRS each year. For 2026 it's 72.5 cents per mile for business use, up 2.5 cents from 2025. The actual expense method deducts the business-use share of gas, maintenance, insurance, and depreciation on the vehicle. You pick one method per vehicle; keep a mileage log either way. Overnight travel to check on an out-of-area property can also qualify, but the IRS scrutinizes travel that mixes business with a personal trip, so document the business purpose.

9. Professional and management fees

Fees you pay to run the rental are deductible. On the legal and accounting side that includes lease review, tax preparation for the rental, bookkeeping, and eviction costs. On the management side it includes real estate commissions, tenant-screening costs, leasing fees, and property management fees.

If you self-manage with software, those fees are deductible too. That's where the cost structure matters: traditional full-service property management typically runs 10% or more of collected rent plus leasing fees, while software like Nomad runs closer to 4%, and either way the fee is deductible. The point of good software is that the platform handles the repetitive work (syndication, screening, lease generation, rent collection, and maintenance triage) while you keep the decisions: you set the rent and choose the tenant from screened applicants.

A full-service local property manager is the right answer for some owners. Someone to take the 9 p.m. maintenance call, walk the property, and meet the plumber is worth paying for if you own several doors, live far away, or want to be truly hands-off. It's worth asking a manager you interview how they think about pricing, since a manager's incentive is to keep the home occupied, which isn't always identical to holding out for the highest rent. Whichever path you choose, the management fee is deductible.

Related reading: Nomad vs. property manager vs. self-managing compares the three paths on cost and effort.

10. HOA and association fees

If the property sits in a homeowners association or condo association, your regular dues are deductible: HOA dues, condo fees, and similar assessments. This is often more valuable than it looks, because condo and HOA fees frequently bundle in water, sewer, grounds maintenance, and snow removal you'd otherwise pay separately. Special assessments for improvements to the common property are treated differently, because those are generally capitalized rather than deducted at once, so separate a routine due from an improvement assessment.

11. Home office and other operating costs

A handful of smaller deductions get missed because they don't arrive as a single big bill:

• Home office: if you use part of your home regularly and exclusively to manage your rentals, you may qualify for the home office deduction.

• Supplies and software: accounting tools, listing software, and office supplies used for the rental.

• Bank and financing fees: fees on an account you keep for the rental, and certain loan costs.

• Education: books, courses, and subscriptions to improve your rental business (not to enter a new one).

The 20% QBI deduction on rental income

Beyond deducting expenses, the tax code may let you deduct a slice of the rental income that's left over. The qualified business income (QBI) deduction under Section 199A lets eligible owners deduct up to 20% of net rental income. The One Big Beautiful Bill Act made this deduction permanent. It had been scheduled to expire after 2025.

The catch is that your rental has to rise to the level of a trade or business, not a passive holding. The IRS offers a safe harbor: if you (and any agents or contractors) perform at least 250 hours of rental services a year and keep contemporaneous records, the activity can qualify. Above certain income thresholds the deduction phases down and additional limits apply. Whether your rental qualifies is exactly the kind of question to put to a CPA. The upside is a 20% deduction on otherwise-taxable income, so it's worth the conversation.

How much of a loss can you actually deduct?

Deductions can push a rental to a paper loss, which is common in the early years when depreciation and mortgage interest are high. Rental real estate is generally a "passive activity," which means losses can normally offset only other passive income, not your wages. There's an important exception: if you actively participate in the rental (you make management decisions like approving tenants and repairs), you can deduct up to $25,000 of rental losses against your ordinary income. That allowance phases out between $100,000 and $150,000 of modified adjusted gross income and disappears above it. Losses you can't use aren't gone; they carry forward to future years and are freed up when you eventually sell.

Repairs vs. improvements, at a glance

Frequently asked questions

Is rental property tax deductible?

Yes. The ordinary and necessary costs of operating a rental (mortgage interest, property taxes, insurance, repairs, utilities, depreciation, travel, and management fees) are deductible against rental income on Schedule E. Your loan principal and the value of your own labor are the main things you can't deduct.

Do I have to itemize to deduct rental property taxes?

No. Property taxes on a rental are a business expense on Schedule E, so you deduct them whether you take the standard deduction or itemize on your personal return. That's different from property taxes on your personal home, which you can only deduct if you itemize.

Do rental property taxes count toward the $10,000 (now $40,000) SALT cap?

No. The SALT cap applies to personal state and local taxes on Schedule A. Property taxes on an investment rental are a business expense on Schedule E and are not subject to the cap.

Can I deduct my mortgage payment?

You can deduct the interest portion, not the principal. Principal repayment builds equity rather than being an expense. Your Form 1098 shows the interest.

Can I deduct lost rent while the property sits vacant?

No. You can't deduct rental income you never collected. But you can keep deducting operating expenses (mortgage interest, property taxes, insurance, utilities, and depreciation) during a reasonable vacancy while the home is available to rent. Vacancies happen: Nomad's portfolio data through June 2026 shows a median of about 30 days between tenants at turnover, with roughly one in four turnovers stretching past 60 days, so it's normal to carry a property's costs for a stretch between leases.

What is depreciation recapture?

Depreciation recapture is the tax you owe on the depreciation you claimed once you sell the property. The IRS effectively asks for some of that benefit back, taxed at a rate up to 25%. It's not a reason to skip depreciation (the IRS can treat you as having taken it whether you did or not), but it's why the sale year needs a tax advisor.

Do I need an LLC to deduct rental expenses?

No. Deductions are tied to the rental activity, not to holding it in an LLC. An LLC can offer liability separation and other benefits, but a sole owner reporting on Schedule E gets the same operating deductions.

Can I write off a repair and an improvement the same way?

No. A repair is deducted the year you pay it; an improvement is capitalized and depreciated. When in doubt, the de minimis safe harbor ($2,500 or less per item) and cost segregation are the tools that speed things up, and both are worth reviewing with your accountant.

Work with a professional and keep good records

The owners who capture the most deductions are the ones who track expenses all year rather than reconstructing them in April. Keep receipts, mileage logs, and a dedicated account for the rental, and hand your CPA a clean set of records. A trusted tax advisor will catch the provisions that depend on your income and entity, like the QBI deduction, the passive loss allowance, and cost segregation, that a checklist can't decide for you.

Nomad is property management software that owners use to lease and manage their own rentals, with guaranteed rent behind it. The platform handles the repetitive work (syndication, screening, state-specific leases, rent collection, and maintenance triage) while you set the rent and choose the tenant. If you want to see what your home could rent for, enter your address for a free, no-obligation estimate.

Related reading: First time renting your property? Here's what to know and do, the complete guide to renting out your home.

Nomad is not a tax, legal, or accounting advisor. This guide is for general information only; consult a licensed professional about your specific situation. Tax figures and provisions cited (2026 mileage rate, SALT cap, bonus depreciation, and QBI rules) are current as of September 2026 and subject to change.