Tax Deductions for a Rental Property

December 22, 2023

Rental property investing can open the doors to financial freedom, passive income, and long-term wealth creation. Unfortunately for investors, navigating the ins and outs of paying taxes on rental properties can lead to confusion and, at times, legal trouble.

However, one of the best parts about owning rental properties is the ability to take advantage of federal and state tax deductions. Also known as tax write-offs, these deductions will reduce your tax liability and allow you to increase the profit margins on your rental properties. 

Let’s take a look at how tax deductions work and the most common ways you can use them for your real estate investing business.

Why Use Tax Deductions?

Tax deductions were first implemented by the United States government for several key reasons. 

First, these deductions are designed to incentivize and promote real estate investment throughout the United States. The government understands that the housing market is a major component of the financial well-being of the country, and in order to stimulate the market and continue economic growth, tax incentives were born.

Additionally, many people simply cannot afford to buy a home regardless of current economic conditions. Investors with the means to purchase homes can rent their properties to tenants and bolster the rental housing market.

Common Tax Deductions for Rental Properties

Rental property investors have many different tax deductions they can take advantage of depending on their objectives and investing strategy. Here are the most common:

Mortgage Interest

Real estate investors who purchase their rental properties with a traditional mortgage can use the mortgage interest tax deduction to lower their tax liability.

Much like a normal homeowner, rental property investors with a mortgage send their lender a monthly payment consisting of their principal, interest, taxes, and insurance (PITI). The interest portion of the PITI payment is tax deductible and will be subtracted from all rental income received from tenants.

Property Taxes

If you’re reading this article, you’re probably familiar with property taxes and how they work. But you might not have known that they are tax deductible for rental property investors.

Much like the mortgage interest tax deduction, investors will subtract their property taxes from their rental income at the end of the year when filing taxes. We highly recommend working with a qualified Certified Public Accountant (CPA) to ensure you’re taking advantage of all tax deductions and following IRS regulations.

Repairs and Maintenance

Repairs and maintenance are a common aspect of owning rental properties. Whether you’re buying a turnkey property or a downright deplorable home, you’ll be on the hook for all repairs and ongoing maintenance expenses.

Common repairs and maintenance tasks include plumbing issues, roof repairs, repainting, HVAC, and electrical work. It’s important to keep track of all maintenance expenses to report the deduction with your accountant at the end of the year.


The most common utilities you’ll need to pay as a property owner include gas, electric, water, sewer, and trash removal. However, some of these expenses may be paid by the tenant depending on your rental agreement.

For the portion of utilities paid by the investor, they can deduct all expenses from their rental income each month.

Final Thoughts

Regardless of your objectives as a real estate investor, taking advantage of tax deductions is one of the best ways to boost ROI and save money on tax breaks offered by the government.

Remember to consult with a qualified tax professional who specializes in real estate investing to avoid legal trouble and keep more money in your pocket at the end of the year.

Are you looking for a real estate agent in Massapequa? The Kim Holland Homes team is the #1 real estate team on Long Island. Contact us or call Kim today at 516-236-6303 to start the process of finding your dream home.