The Best Guide to Rental Property Tax Deductions for Landlords

Not all rental property expenses are treated equally at tax time. This guide helps landlords understand which costs are fully deductible, which must be capitalized and depreciated, and which are not deductible at all—all in line with IRS rules.

Fully Deductible Rental Expenses

The IRS allows landlords to deduct ordinary and necessary expenses for managing, conserving, or maintaining rental property. These are typically claimed on Schedule E in the year the expense is paid.

Capitalized Expenses (Not Deductible All at Once)

Capital improvements increase the property’s value, extend its useful life, or adapt it to a new use. These costs must be depreciated over 27.5 years for residential rental properties.

Capital improvements are reported on Form 4562 and added to your depreciation schedule.

Not Deductible

The following expenses are either not allowed or not related to the business use of your rental property:

Snippet-Friendly: Is It a Repair or an Improvement?

Repair = Deduct now: Restores property to original condition (e.g., replacing a broken door lock).
Improvement = Capitalize: Adds value or extends useful life (e.g., replacing all locks with a smart security system).

If in doubt, the IRS rule of thumb: If it fixes what’s broken, it’s a repair. If it upgrades what was there, it’s an improvement.

Stay Organized

Proper classification starts with clear documentation. Retain:

• Receipts, contracts, and work orders
• Dates of service and proof of payment
• Photos of work done, especially for improvements

Track repairs and improvements separately from the start to avoid IRS issues later.

Need Help Applying This to Your Properties?

Accolade Accounting works with landlords to correctly classify expenses, track depreciation, and document repairs in IRS-ready formats.

Looking for a filing checklist instead? Visit our Rental Property Tax Filing Checklist to prepare confidently for tax season.