As with any business enterprise, rental property owners are allowed to deduct certain expenses from their income tax returns. It’s important to take advantage of these deductions to lower your tax liability and put more money in your pocket.
If you’re a rental property owner, here are four tax deductions you don’t want to miss this tax season.
Bonus Depreciation
The 100% special “bonus” depreciation allowance was restored for qualified property acquired and placed into service after Jan. 19, 2025, according to the IRS. It lets rental property owners deduct part of their eligible asset costs in the first year, providing an important cash-flow boost when compared with the standard 27 1/2-year depreciation.
“This matters in the 2025 tax year because delayed acquisitions now trigger immediate deductions, which can offset rental income that otherwise flows through to personal returns,” said Chad Cummings, a CPA and attorney at Cummings & Cummings Law. “The risk comes from misclassifying repairs versus improvements, which invites recharacterization and penalties.”
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Business Interest Expenses
Another important deduction that recently changed is the business interest expense deduction. This deduction now uses earnings before interest, taxes, depreciation and amortization (EBITDA) rather than earnings before interest and taxes (EBIT), which increases deductible interest for leveraged rental portfolios, Cummings said.
“Owners with adjustable rate debt or refinanced properties should reassess deductibility because interest once disallowed may now be deductible, which could be a major win,” he told GOBankingRates.
Qualified Business Income (QBI) Deduction
This deduction lets rental property owners and other eligible taxpayers deduct up to 20% of their QBI plus 20% of qualified real estate investment trust dividends and qualified publicly traded partnership income, according to the IRS.
The QBI deduction “reduces effective tax rates on net rental income,” Cummings said.
State/Local Deductions
Be sure to check with your state and local tax authorities to find out which deductions are available to rental property owners.
As Cummings noted, these deductions have increased for certain filers for the 2025 tax year. Be sure to separate personal and business expenses, which Cummings called a “common misstep” among residential landlords.
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This article originally appeared on GOBankingRates.com: I’m a CPA: If You Own Rental Property, Here Are 4 Deductions You Don’t Want To Miss
