Tax season is stressful for rental property owners who haven't kept good records. The good news is that rental properties come with significant tax advantages — but only if you track the right things.
This is general educational information. Always work with a qualified CPA who specializes in real estate for advice specific to your situation.
What rental income to report
All rent received is taxable income. This includes regular monthly rent, pet rent, late fees, and any other payments from tenants. Security deposits are not taxable when received — only if you keep them at the end of the tenancy.
What expenses are deductible
Most ordinary and necessary expenses related to your rental property are deductible:
- Mortgage interest
- Property taxes
- Insurance premiums
- Management fees (yes, what you pay Tru Diligence is deductible)
- Maintenance and repairs
- Utilities you pay
- Professional fees (attorney, accountant)
- Advertising costs
The difference between repairs and improvements
Repairs are deductible in the year they occur. Improvements must be depreciated over time. A new coat of paint is a repair. A kitchen remodel is an improvement. This distinction matters — get clear on it with your CPA.
Depreciation
This is one of the most powerful tax advantages of rental property ownership. The IRS allows you to depreciate the value of the building (not the land) over 27.5 years. This creates a paper loss that offsets rental income — even when you're cash flowing positively.
Track everything
Keep receipts, invoices, bank statements, and mileage logs. Your owner portal through Buildium provides monthly statements that make year-end tax preparation significantly easier.
Work with a CPA who understands real estate. The tax advantages of rental property ownership are substantial — but only if you capture them properly.