Updated: August 2026
Stocks and bonds are among the investments subject to taxes over and above the simple income tax. However, landlords can receive some generous tax benefits from owning rental properties. Tax benefits associated with rental income aren't enough to buy rental properties, but they're worthwhile to consider if you're looking for investment options and important to keep in mind if you are a landlord.
Any person considering or owning a property needs to be aware that tax results can vary depending on your specific facts and circumstances. Consult your tax advisor or certified public accountant to determine the tax implications of owning rental properties. Tax law has also changed quite a bit recently, so even if you've read up on this before, it's worth a refresher.
Repairs Are Generally Deductible the Year You Make Them
Repairs are generally deductible the year they're made. In cases where larger projects are classified as improvements rather than repairs, you might be required to deduct the cost through depreciation instead of all at once, so make sure this is something your accountant can help you sort out. Plumbing, heating, electrical, or carpentry repairs can all reduce your taxable rental income.
Mortgage and Loan Interest
Landlords can deduct interest expense in a variety of ways, including mortgage interest. Mortgage interest is usually the largest deduction landlords can claim. For property-related expenses, you can also deduct home improvement loan interest and even credit card interest tied to the property.
Depreciation Just Got a Lot More Valuable
Depreciation is like receiving a gift of cash in the form of a deduction. It doesn't require you to spend any money to receive it. Depreciation on buildings and land improvements is deductible each year (land value itself is not deductible).
2026 Update: The 2025 federal tax law change, the One Big Beautiful Bill Act, permanently restored 100% bonus depreciation for qualifying property placed in service after January 19, 2025. In plain terms, that means certain assets, like appliances, carpeting, fencing, driveways, and other components of your property, can potentially be deducted in full in year one instead of being spread out over 5, 15, or 27.5 years. This can create a much bigger deduction in the year you buy or renovate a property than landlords have been used to. Talk to your accountant about whether a cost segregation study makes sense for your property, since that's typically how these accelerated deductions get identified and claimed.
Marketing Your Property
Advertising your rental property in local newspapers, magazines, or on rental property websites is tax deductible.
Travel Expenses
Local and long-distance expenses both qualify for this deduction, as long as they're related to rental property activity. Typical travel expenses might include:
- Showing a prospective tenant the property
- Conducting market research or looking for homes to buy
- Attending an investor seminar (ask your accountant what expenses you can deduct for travel, lodging, car rentals, and other costs)
- Purchasing materials at a hardware store
Independent Contractors and Employees
You may hire landscapers, painters, or exterior cleaners as independent contractors, and you can deduct the amount you pay them. If an employee performs maintenance or management tasks instead of a contractor, their wages can be deducted from your rental income as well.
Insurance Premiums
Your rental property needs to be insured, and if it's mortgaged, your lender will require it. You can deduct insurance premiums, including property, liability, and casualty coverage.
Local Property Taxes
You can deduct local property taxes, along with county, city, and school taxes tied to the property. If you also itemize deductions on your personal return, it's worth knowing the state and local tax (SALT) deduction cap was raised to $40,000 under the same 2025 tax law update, which may let you deduct more than you could in past years depending on your overall tax picture. Ask your accountant how this interacts with your specific return.
Casualty and Theft Losses
Property loss resulting from a break-in, a fire, or something else beyond your control is normally fully deductible. This includes only expenses not covered by insurance, such as deductibles paid on a claim.
Accounting, Legal, and Management Services
You might hire professionals across these disciplines, and their fees are deductible in the year they're paid. If you hire a property management company to handle tenant relations and the day-to-day headaches of ownership, a portion of that cost is deductible from your rental income as well.
Using Rental Losses to Offset Other Income
This is one of the more misunderstood tax benefits, so it's worth being precise about it. You can sometimes use a rental property's loss to offset income from other sources, but there are real limits. Rental losses are generally treated as passive by default, meaning they can typically only offset other passive income unless you qualify for one of a couple of exceptions.
One common exception allows active participants to deduct up to $25,000 in rental losses against other income, but that allowance phases out as your modified adjusted gross income rises and disappears entirely once you're above a certain threshold. Real estate professionals who meet specific IRS hours and participation requirements have more flexibility here.
Depreciation is often what drives these losses. It's possible to have strong cash flow from a property while still showing a paper loss once depreciation and mortgage interest are factored in. Whether any of this applies to your situation depends heavily on your income level and how involved you are in managing your properties, so this is a conversation to have directly with your accountant.
Talk to Your Accountant Before Tax Time
Tax breaks for rental income can help you save a lot of money at tax time and enhance your investment, especially with the recent changes to bonus depreciation and the SALT cap. But tax law in this area has real nuance and changes often, so you should discuss these deductions with your tax preparer to determine which ones apply to you.
For more detailed information and publications specific to rental income and expenses, visit the Internal Revenue Service website.
Ready to Maximize Your Rental Income?
If you own rental property in the Denver area, Colorado Realty and Property Management is here to help. Our team knows how to price your property right, get it market ready, and attract high quality tenants who stay. Contact us today for a free rental analysis and see how we can help you maximize your return while minimizing vacancy time.
