Tax help for landlords and rental property owners
You buy the property, sign the leases, and take the call when the water heater dies. We handle the return, the depreciation schedule, and the paperwork that follows every property you own.
Nothing is due today. Personal returns start at $250.
Rental income is usually reported on the rental schedule of your personal return, Schedule E, and ordinary rental income is generally not subject to self employment tax. What makes it work is everything around the rent: splitting the purchase price between land and building, deciding what counts as a repair and what has to be depreciated, and tracking a depreciation schedule that follows each property for as long as you own it. Those pieces drive the numbers on the return, and they also drive what happens on the day you sell.
What landlords can usually deduct
Ordinary and necessary costs of your work. Rules and dollar limits change year to year, so we confirm every one of these against the current year when we prepare your return.
Mortgage interest on the rental
Interest on the loan used to buy, build, or improve a rental property is a rental expense. It belongs on the rental schedule for that property rather than in your personal itemized deductions.
Only the interest is deductible. Principal is not, and escrow money sitting in the account is not deductible until the tax or insurance bill is actually paid. What matters is how the borrowed money was used, not which house secured the loan, so a cash out refinance you spent on something personal follows the money.
Property taxes and assessments
County and city property taxes, tangible property tax on furnished units, and local assessments tied to services are deductible against the rental income they relate to.
The cap on state and local taxes applies to personal itemized deductions. Property taxes on a rental are a rental expense and are not counted against that cap. A special assessment that pays for an improvement, such as a new roof for the building or new roads in the community, is generally added to your basis instead of deducted.
Depreciation of the building
Depreciation is often the largest deduction on a landlord return, and it is the one nobody sends you a statement for. You split the purchase price between land and building, then write off the building over the recovery period set in the tax law for that type of property. Residential rentals and commercial rentals use different recovery periods.
Land is never depreciable, so a purchase price with no land split needs to be corrected. Depreciation begins when the property is ready and available to rent, not on the day you closed. When you sell, your gain is figured using a basis reduced by the depreciation that was allowed or allowable, so skipping it does not protect you later.
Repairs and maintenance
Plumber and electrician calls, a water heater repair, patching and repainting between tenants, pest control, gutter cleaning, pressure washing, HVAC service visits, garage door and appliance service.
This is where landlord returns most often go off track. A repair keeps the property working the way it already worked. Work that betters the property, restores it after it fell apart, or adapts it to a new use is an improvement: a new roof, a full HVAC replacement, a gut kitchen, new windows, a repiping. Those go on the depreciation schedule. There are safe harbors that allow some smaller items to be expensed when the conditions are met, and we apply them where they fit.
Landlord and flood insurance
Dwelling and fire policies on the rental, liability coverage, the share of an umbrella policy that covers your rentals, wind and flood policies, and loss of rents coverage.
Prepay a multi year policy and you generally deduct it over the period the coverage covers, not all in the year you wrote the check. Insurance on the home you live in is personal and stays off the rental schedule. If a loss of rents policy pays out, that payment is income to you.
Management and leasing fees
What a property manager keeps out of the rent, tenant placement and leasing commissions, HOA and condo association dues on the unit, and eviction service or court filing fees.
A leasing commission paid to place a tenant on a multi year lease may need to be spread over the lease term rather than deducted all at once. Association special assessments for capital projects are not dues, and they are generally capitalized.
Turnover, cleaning and yard work
Make ready cleaning, carpet cleaning, trash out and haul away, lawn and landscape service, pool service, tree trimming, and the supplies you keep for turns such as filters, batteries, light bulbs, locks and paint.
Work done on a property before it was ever available to rent is part of getting the property ready, not a current deduction. That first rehab after you buy generally gets added to the cost of the property and depreciated.
Advertising and tenant screening
Listing fees on rental sites, MLS or agent fees to market the unit, yard signs, photography, and the credit reports, background checks and application processing you run on applicants.
If you charge applicants an application fee, that fee is rental income to you. Deduct the screening cost and report the fee, do not net them against each other.
Driving and travel to properties
Trips to show units, collect rent, meet a contractor, inspect after a storm, or run to the supply store are business miles. You can use the IRS standard mileage rate published for that year or your actual vehicle costs, and either way you need dates, destinations and purpose. Overnight travel to an out of area rental follows the same rules as any business trip.
Miles driven for an improvement project get added to the cost of that improvement rather than deducted. Trips to look at properties you have not bought yet are generally not currently deductible. A trip that is mostly a family vacation with an afternoon at the rental does not become a business trip.
Utilities you cover
Water, sewer and trash you pay, electricity for common areas and vacant units, gas, lawn irrigation, and internet or streaming you provide in a furnished or short term rental.
If a tenant pays a bill in your name and subtracts it from the rent, that amount is still rental income to you and still your deduction. Reporting only what hit your bank account understates both sides.
Appliances and furnishings
Refrigerator, range, dishwasher, washer and dryer, water heater, window units, mowers and tools, smart locks, cameras and doorbells, plus beds, sofas and kitchen goods in a furnished or short term rental.
These are assets with shorter recovery periods than the building, and first year expensing rules can sometimes let you deduct them faster when the eligibility conditions and limits are met. The write off starts when the item is placed in service in the rental, not when you bought it, so a refrigerator sitting in your garage for a season does not count yet.
Legal, bookkeeping and software
Attorney fees for evictions, lease drafting and review, bookkeeping help, rent collection and property management apps, e sign and screening subscriptions, bank fees on the account you use for the rentals, and the portion of your tax preparation fee that covers your rental schedules.
Legal fees to acquire or defend title to a property are not a current deduction. They are added to the basis of the property.
Rental property is commonly reported on Schedule E in your own name or through a single member LLC, and that can continue to work as the property count grows. Co owning with someone other than your spouse often means a partnership return, depending on how the arrangement is structured, and real estate is rarely a good fit inside an S corporation. Ask us before a deed moves into an entity.
What to bring us
You do not need all of it to start. Send what you have and your checklist shows what is still open.
- The closing or settlement statement from when you bought each property, plus any refinance since
- Last year's return including the full depreciation schedule, every asset listed, not just the summary page
- A rent roll or month by month list of what each unit collected, including any deposit you kept
- Form 1098 mortgage interest statements for each property loan
- Property tax bills, HOA and association statements, and any special assessment notices
- Insurance policies with premiums paid, including wind and flood
- Year end owner statements from any property manager, and any 1099-K or annual statement from a rental platform
- Repair and project invoices, split into work that kept things running and work that made things better or new
- Dates each unit was available to rent, rented, and vacant, plus any days you or family stayed there
- Mileage log or app export with trips grouped by property
What trips people up
Skipping depreciation, or inheriting a return where it was never set up
When you sell, gain is figured using a basis reduced by the depreciation that was allowed or allowable, whether or not you claimed it. Depending on how long the wrong method was used, missed depreciation is often corrected through a change in accounting method on Form 3115 rather than by amending old returns, and we will tell you which path your facts support. Bring the closing statement and we will build the schedule from the ground up.
Calling a whole project a repair because it felt like maintenance
Sort the year's work into two lists: what kept the property running, and what bettered it, restored it, or changed its use. The second list belongs on the depreciation schedule, and some items on it may still be written off faster if they meet the rules.
Deducting rent you never collected during a vacancy or after a tenant stopped paying
You never reported that rent as income, so there is nothing to write off. Deduct the real costs of the vacancy instead, such as utilities, advertising, cleaning, lawn service and mortgage interest, as long as the property is still held out for rent.
Treating every deposit as income, or forgetting the one you kept
A refundable security deposit is not income when you receive it. It becomes income in the year you keep it or apply it to unpaid rent. Last month's rent collected up front is income the year it comes in, no matter which month it covers.
Writing off the rehab on a property that was not yet available to rent
The clock starts when the unit is ready and available for a tenant. Spending to get it to that point generally goes into the cost of the property and is depreciated. Track the date it hit the market and keep the listing as proof.
What it costs
Our published list, the same one everyone sees. Prices marked "from" are starting points, and your exact number is confirmed in writing before any work begins.
$0 is due today. You pay when you sign, or you can have your fee come out of your refund, so it can be $0 out of pocket.
Questions we get from your trade
Do I pay self employment tax on my rent?+
Generally no. Ordinary residential rental income goes on Schedule E and is not subject to self employment tax. That can change if you provide substantial services to guests beyond what a landlord normally provides, such as daily cleaning during the stay, meals, or concierge service, which can move the activity to Schedule C and bring self employment tax with it. It is a facts and circumstances test, so tell us what services you actually provide and we will place it correctly.
My rental lost money on paper. Why did the loss not show up?+
Rental losses are passive by default, and passive losses generally offset only passive income unless an exception applies. There is a limited allowance for owners who actively participate in managing the property, and it shrinks and then disappears as income rises. There is also a separate status for people whose main occupation is real estate, which carries specific hour and time requirements. Losses you cannot use are carried forward, and they generally free up when you dispose of your entire interest in the property in a fully taxable sale to an unrelated party.
Should I put my rentals in an LLC?+
An LLC is mainly a liability question, not a tax one. A single member LLC is generally treated as a disregarded entity for federal income tax, so the rental usually reports the same way it did before, though state registration, annual fees and filings can still apply and an LLC can elect to be taxed as a corporation. Talk to an attorney about the liability side, and talk to us before you move a deed anywhere, especially into a corporation. Moving appreciated real estate into a corporation is easy and taking it back out can be expensive.
I rent my place out short term. Is that handled differently?+
Yes, in several ways. How many days you or your family use the property matters, short average guest stays are tested under different rules than long term rentals, and a 1099-K from a booking platform generally reports gross bookings before the platform took its cut and may include cleaning fees and taxes, so the number will be larger than what reached your bank. Bring the day counts and the platform statements and we will reconcile them.
A storm damaged one of my rentals. How does that get handled?+
Damage to property held for rent is handled under the casualty rules for business and income producing property, and the deductible amount depends on your basis in what was damaged and what insurance paid, not on the size of the repair bill. Insurance proceeds above your basis can create a gain rather than a loss, and work that restores the property after major damage often has to be capitalized rather than expensed. Keep the adjuster report, the claim payout detail and every contractor invoice.
I am thinking about selling. Anything I should do before I sign?+
Call us first. Your gain includes the depreciation taken over the years, and a like kind exchange has to be set up with a qualified intermediary before the closing, not after the proceeds reach you. Once the money is in your account, that option is gone.
Let us take the tax part off your plate.
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