Rental property expenses: what you can deduct and where it goes on Schedule E
Rental income and expenses go on IRS Schedule E. Most ordinary and necessary costs of owning and running a rental are deductible in the year you pay them. The big exceptions are improvements and the building itself, which you deduct over time through depreciation.
Where each expense goes
3Rents received
- What goes here
- All rent received during the year, whenever it applies to
- Examples
- Monthly rent, rent paid in advance, late fees, pet fees, a security deposit you keep, repairs a tenant does in place of rent
5Advertising
- What goes here
- Marketing a vacancy
- Examples
- Listing fees, signs, photos
6Auto and travel
- What goes here
- Trips for the rental, at the IRS standard mileage rate or actual costs
- Examples
- Showing the unit, meeting a contractor, buying supplies
7Cleaning and maintenance
- What goes here
- Keeping the property clean and running
- Examples
- Turnover cleaning, lawn care, snow removal, pest control
8Commissions
- What goes here
- Fees paid to find a tenant
- Examples
- Leasing and tenant-placement fees
9Insurance
- What goes here
- Policies on the rental
- Examples
- Landlord (dwelling) policy, flood, liability
10Legal and other professional fees
- What goes here
- Professional help with the rental
- Examples
- Tax prep for the rental, bookkeeping, eviction attorney, lease review
11Management fees
- What goes here
- Your property manager's fees
- Examples
- Monthly management fee, lease renewal fee
12Mortgage interest paid to banks, etc.
- What goes here
- Interest on loans used to buy or improve the rental, from Form 1098
- Examples
- Mortgage interest (not principal)
13Other interest
- What goes here
- Rental interest not on a Form 1098
- Examples
- Seller financing, credit card interest on rental purchases
14Repairs
- What goes here
- Fixes that keep the property working without making it better
- Examples
- Fixing a leak, patching drywall, replacing a broken window pane, servicing the furnace
15Supplies
- What goes here
- Small items used up running the rental
- Examples
- Filters, light bulbs, batteries, cleaning supplies
16Taxes
- What goes here
- Taxes on the rental property
- Examples
- Property tax, local rental license taxes
17Utilities
- What goes here
- Utilities you pay, not the tenant
- Examples
- Water, sewer, trash, gas, electric
18Depreciation expense or depletion
- What goes here
- Yearly deduction for the building and improvements, from Form 4562
- Examples
- Building, new roof, appliances, flooring
19Other
- What goes here
- Ordinary and necessary costs that don't fit above, listed by type
- Examples
- HOA dues, tenant screening, rental license or permit, bank fees, software
Property tax on a rental isn't subject to the cap on state and local taxes that applies to itemized deductions.
General information, not tax advice. Your situation may differ; talk to your tax preparer.
What doesn't go on Schedule E as an expense
Mortgage principal. Only the interest is deductible.
Improvements. A new roof, an addition or a full kitchen remodel is depreciated over time (line 18), not expensed.
The purchase price and most closing costs. These become your cost basis and are depreciated. Land is never depreciated.
Your own time. You can't deduct the value of your labor.
Security deposits you'll return. Not income when received and not an expense when refunded.
The personal share. If you used the property yourself, that portion of expenses isn't a rental expense.
Common questions
Is it a repair or an improvement?
A repair keeps the property in working order and is deducted this year. An improvement makes it better, adapts it to a new use or restores something major, and is depreciated over time. Patching a roof is a repair; replacing the roof is an improvement.
Three IRS safe harbors let you expense more:
- De minimis: items or invoices of $2,500 or less can be expensed.
- Routine maintenance: recurring work you'd expect to do more than once in 10 years.
- Small taxpayer: if the building cost $1 million or less, total repairs and improvements for the year up to the lesser of $10,000 or 2% of the building's cost can be expensed.
The de minimis and small taxpayer safe harbors are elections made each year with your return.
How does depreciation work on a rental?
You deduct the cost of the building, not the land, over 27.5 years for residential property (39 years for commercial), starting when the property is ready to rent. Improvements are depreciated separately: appliances, carpet and furniture over 5 years; fences, driveways and landscaping over 15 years. Many of these shorter-lived items qualify for 100% bonus depreciation, which lets you deduct them in the first year.
When you sell, the depreciation you took (or could have taken) is generally taxed at up to 25%. Skipping depreciation doesn't avoid this, so claim it every year.
What if I used the property personally part of the year?
Split expenses between rental days and personal days. If your personal use is more than the greater of 14 days or 10% of the days it was rented at a fair price, the property counts as a residence and you can't deduct a rental loss.
Days a relative stays for below-market rent count as personal days. Days spent mainly working on the property don't.
If you rented the property for fewer than 15 days in the year, don't report the rent or deduct the rental expenses.
Can I deduct a loss from my rental?
Usually, up to a limit. Rental losses are "passive," so they generally only offset other passive income. If you actively participate (approving tenants, setting rent, approving repairs, including through a property manager), you can deduct up to $25,000 of rental losses against other income. That allowance phases out between $100,000 and $150,000 of modified adjusted gross income.
Losses you can't use carry forward and are released when you sell the property. Real estate professionals and short-term rentals follow different rules.
What about short-term rentals?
If the average guest stay is 7 days or less, the passive loss rules treat it differently, and losses may offset other income if you're materially involved. If you provide hotel-like services such as daily cleaning or meals, the income may belong on Schedule C instead, with self-employment tax. Talk to your tax preparer before your first year.
What records should I keep?
- The closing statement from your purchase (for depreciation)
- Receipts and invoices for every expense and improvement
- A mileage log
- Form 1098 from your lender and your property tax bills
- Year-end statements and any Form 1099 from your property manager
Keep purchase and improvement records until at least three years after you sell.
Last updated: November 2026
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