Every year we review tax returns for new clients and find deductions they missed. Not obscure ones. Basic, well-established deductions that their prior CPA either didn’t know about or didn’t ask about.
The tax code gives real estate investors more deductions than almost any other type of investment. But you only get the benefit if you claim them. And you can only claim them if you track them throughout the year, not in a scramble every April.
This checklist covers every deduction available to real estate investors in 2026, updated for the One Big Beautiful Bill Act (OBBBA) changes. We organized it by category so you can scan it quickly, check what you’re currently claiming, and flag anything you’ve been missing.
Print this out. Share it with your CPA. Use it as your year-round tracking guide.
Operating Expenses
These are the everyday costs of owning and managing rental property. They’re deducted on Schedule E against your rental income in the year they’re incurred.
- Property management fees. Whether you pay a company 8-10% of collected rents or manage yourself, the management cost is deductible. If you self-manage, document your time.
- Repairs and maintenance. Anything that restores the property to its existing condition without adding value or extending its useful life. Fixing a leaky faucet, patching drywall, replacing a broken window. These are fully deductible in the year incurred.
- Property insurance. Landlord policy, umbrella policy, flood insurance, builder’s risk (during renovation).
- Property taxes. Fully deductible on Schedule E. Important: property taxes on your rental properties are NOT subject to the $40,400 SALT cap. That cap only applies to property taxes on your personal residence claimed on Schedule A.
- Utilities you pay. Water, sewer, trash, electric, gas, internet for common areas or when you cover tenant utilities.
- Landscaping and grounds maintenance. Mowing, tree trimming, snow removal, routine landscaping.
- Pest control. Routine treatments and one-time extermination.
- Cleaning and turnover costs. Cleaning between tenants, make-ready expenses. Especially significant for short-term rentals with frequent turnovers.
- Advertising and marketing. Listing fees on Zillow, Apartments.com, Airbnb/VRBO host fees, signage, photography costs.
- Tenant screening costs. Background checks, credit reports, application processing fees.
- HOA and condo association fees. Monthly or quarterly assessments.
- Supplies and materials. Cleaning supplies, light bulbs, batteries, locks, small tools for property maintenance.
What most people miss: Cleaning supplies, small repair materials bought at hardware stores, and pest control invoices. They seem too small to matter, but across a portfolio they add up to hundreds or thousands per year.
Depreciation
Depreciation is a non-cash deduction that lets you write off the cost of your building over its useful life. It’s the single most powerful deduction for real estate investors.
- Standard depreciation (27.5 years residential, 39 years commercial). The IRS requires you to depreciate the building portion (not land) of every rental property you own. You must take it even if you’d rather not. If you skip it, the IRS taxes depreciation recapture on the amount you were allowed to take, not what you actually took.
- Cost segregation reclassification. A cost segregation study reclassifies building components into 5, 7, and 15-year property. This accelerates your depreciation, especially when combined with bonus depreciation.
- 100% bonus depreciation. Permanent under OBBBA for qualifying property acquired after January 19, 2025. Assets classified as 5, 7, or 15-year property (via cost segregation) can be fully expensed in year one. Full breakdown here.
- Qualified Improvement Property (QIP). Interior improvements to nonresidential property (not structural changes like enlargements or elevators). 15-year depreciation, eligible for bonus depreciation.
- Appliances and fixtures. Refrigerators, stoves, dishwashers, washers, dryers, window treatments. 5-year property, bonus-eligible.
- Land improvements. Parking lots, sidewalks, fencing, landscaping, signage, outdoor lighting. 15-year property, bonus-eligible.
- Look-back depreciation (Form 3115). If you own properties that were never given a cost segregation study, you can do a look-back study now and take all the missed accelerated depreciation as a catch-up deduction in the current year. No amended returns required.
What most people miss: The look-back study. You don’t need to have run cost segregation at acquisition. A study on a property you’ve owned for years can generate a six-figure catch-up deduction in a single year via Form 3115.
Financing Costs
Every dollar you pay in interest and loan-related costs on investment property is deductible or amortizable.
- Mortgage interest. Fully deductible against rental income. No dollar cap for investment properties (the $750,000 mortgage interest cap applies only to your personal residence).
- Points paid on a loan. Amortized over the life of the loan. If you refinance or pay off the loan early, the remaining unamortized points are deducted in the year of payoff.
- Loan origination fees. Amortized over the loan term.
- Private mortgage insurance (PMI). If applicable, deductible as an interest expense.
- Home equity loan interest (if used for investment). Interest on a HELOC or home equity loan is deductible if the proceeds are used to acquire or improve a rental property. Document the use of funds clearly.
- Credit card interest. Interest on credit cards used exclusively for rental property expenses is deductible. Keep the card separate from personal use.
- Interest on lines of credit. If you borrow for property-related purposes, the interest is deductible.
What most people miss: HELOC interest used for investment purposes. If you pulled equity from your primary residence to fund a rental property down payment, that interest is deductible against rental income, not as a personal mortgage interest deduction.
Professional Services
Fees paid to professionals who help manage, maintain, or advise on your real estate investments are deductible.
- CPA and tax preparation fees. The portion attributable to your rental properties is deductible on Schedule E. Personal tax prep is not deductible (Section 212 miscellaneous itemized deductions remain suspended through 2025; check for reinstatement in 2026 legislative updates).
- Attorney fees. Legal fees for lease review, eviction proceedings, entity formation, and ongoing legal counsel related to your rental properties.
- Property management company fees. Monthly management fees, leasing commissions, tenant placement fees.
- Bookkeeping and accounting fees. Fees paid for maintaining your rental property books, bank reconciliation, and financial reporting.
- Cost segregation study fees. The fee paid to the engineering firm is deductible as a business expense in the year incurred.
- Appraisal fees. If the appraisal is for investment or financing purposes (not personal).
- Real estate attorney fees for closings. Some closing costs are capitalizable (added to basis), while others are deductible. Your CPA should separate them.
What most people miss: Cost segregation study fees. The $5,000-$15,000 fee is a deductible business expense, separate from the depreciation benefit the study generates. You get both.
Travel and Transportation
Travel expenses related to managing your rental properties are deductible, whether your properties are across town or across the country.
- Mileage to and from properties. The IRS standard mileage rate for 2026 is $0.70 per mile for business use. Track every trip with the date, destination, miles, and purpose. A mileage tracking app (MileIQ, Everlance) makes this automatic.
- Actual vehicle expenses. Instead of the standard rate, you can deduct actual expenses (gas, insurance, repairs, depreciation) prorated by business-use percentage. Choose whichever method gives you the larger deduction, but once you choose actual expenses for a vehicle, you generally can’t switch back to the standard rate.
- Airfare, hotel, and car rental. If you travel to manage or inspect out-of-town rental properties, the transportation and lodging costs are deductible. The trip must be primarily for business purposes.
- Meals during business travel. 50% deductible when traveling for property management purposes. Keep receipts and note the business purpose.
- Parking and tolls. Fully deductible when incurred for property-related travel.
What most people miss: Mileage. Investors who self-manage make dozens of trips per year to properties, hardware stores, and tenant meetings. At $0.70/mile, a portfolio with 5 local rentals can easily generate $2,000-$3,000 in annual mileage deductions. But only if you track it.
Insurance Beyond Property Insurance
Several insurance categories beyond the basic landlord policy are deductible.
- Umbrella liability insurance. The portion covering your rental properties.
- Workers’ compensation. If you employ maintenance staff or have employees related to your rental operations.
- Health insurance (self-employed). If you’re self-employed as a real estate professional and not eligible for employer-sponsored coverage, you can deduct health insurance premiums as an adjustment to income on Form 1040 (not Schedule E).
- Errors and omissions (E&O) insurance. If you have a real estate brokerage or property management business.
- Flood or earthquake insurance. Supplemental policies beyond standard landlord coverage.
Advanced Strategies and Elections
These aren’t simple deductions. They’re tax elections and strategies that can dramatically change your tax outcome. Each one has specific requirements and should be coordinated with your CPA.
- Section 199A (QBI) deduction. Deduct up to 20% of qualified business income from rental activities. Now permanent under OBBBA. To qualify under the safe harbor, maintain separate books and records and perform at least 250 hours of rental services annually. Phase-out begins at $191,950 (single) / $383,900 (MFJ) for 2026.
- Real estate professional status (REPS). If you or your spouse qualifies, rental losses become non-passive and can offset W-2 income. Requires 750+ hours and more-than-half of your working time in real estate. Full guide here.
- Short-term rental loophole. If your average rental period is 7 days or less and you materially participate, losses are treated as non-passive without REPS. Full breakdown here.
- 1031 exchange. Defer capital gains and depreciation recapture by reinvesting sale proceeds into a like-kind replacement property. 45-day identification window, 180-day closing deadline. Use a qualified intermediary.
- PTET election. Pass-through entity tax election in qualifying states. Your LLC pays state income tax at the entity level and claims a federal deduction not subject to the $40,400 SALT cap. Available in most states but rules and deadlines vary.
- Section 179 deduction. Expense up to $2,560,000 in qualifying property in 2026. Useful for specific asset elections (appliances, equipment) where you want control over the deduction amount without an all-or-nothing approach.
- De minimis safe harbor election. Expense any individual item costing $2,500 or less (per invoice) rather than capitalizing and depreciating it. Must be elected annually by attaching a statement to your tax return.
- Opportunity Zone deferrals. Under QOZ 2.0 (OBBBA), invest capital gains into a Qualified Opportunity Zone Fund. Rolling 5-year deferral periods, 10% basis step-up after 5 years (30% for rural QOZs), and permanent exclusion of gains after 10 years.
- Energy-efficient building deduction (Section 179D). For commercial or multifamily buildings (4+ stories), deduct up to $5.80 per square foot for energy-efficient improvements. Phases out for projects beginning construction after June 30, 2026.
Commonly Missed Deductions (The “Nobody Told Me” List)
These are the deductions we find most often when reviewing returns from new clients:
- Startup costs. If you incurred expenses before your first rental was placed in service (education courses, travel to evaluate properties, legal fees for entity setup), up to $5,000 can be deducted in the year you start your rental business. The remainder is amortized over 180 months.
- Home office. If you manage your rental properties from a dedicated space in your home, the home office deduction applies. Use the simplified method ($5/sq ft up to 300 sq ft = $1,500 max) or the regular method (actual costs prorated by square footage).
- Phone and internet. The business-use percentage of your cell phone and internet bill is deductible. If 40% of your phone use is for property management, 40% of the bill is deductible.
- Software and subscriptions. QuickBooks, property management software (AppFolio, Buildium, Rent Manager), Airbnb/VRBO subscriptions, mileage tracking apps, real estate analysis tools, and cloud storage for property documents.
- Education and training. Courses, seminars, and continuing education directly related to your existing rental business. This does not include education to enter a new business.
- Bank fees. Account maintenance fees, wire transfer fees, and other banking charges on your rental property accounts.
- Casualty and theft losses. If not covered by insurance, losses from storms, fires, theft, or vandalism on rental property may be deductible.
- Bad debt. If a tenant owes rent and you’ve made reasonable attempts to collect, the uncollectible amount can be deducted as a bad debt expense.
What’s New for 2026
The OBBBA made several significant changes effective for the 2026 tax year:
- 100% bonus depreciation is now permanent for qualifying property acquired after January 19, 2025. No more phase-down.
- SALT cap increased to $40,400 for 2026 (up from $40,000 in 2025). Phases down for MAGI above $505,000.
- QBI deduction (Section 199A) is now permanent. No sunset.
- QOZ 2.0 extends and enhances the Qualified Opportunity Zone program with new rural zone benefits.
- Section 179 limit increased to $2,560,000 with a phase-out threshold of $4,090,000.
- Section 179D energy-efficient commercial building deduction phases out for projects beginning construction after June 30, 2026.
How to Use This Checklist
Don’t wait until tax time. Use this list throughout the year:
January: Review your prior year return against this checklist. Identify deductions you missed. Discuss with your CPA before filing.
Monthly: Track all expenses by category. Reconcile bank accounts. Log your mileage. Save receipts digitally.
Quarterly: Review your year-to-date expenses against this checklist. Are you tracking everything? Are there deductions you’re missing?
October-November: Meet with your CPA for year-end tax planning. Discuss cost segregation, REPS qualification, PTET elections, and any acquisitions or dispositions planned before December 31.
Year-end: Make any final purchases or elections that need to be completed by December 31 (de minimis safe harbor election, PTET election deadlines, 1031 exchange identification periods).
The investors who save the most on taxes aren’t the ones with the cleverest tricks. They’re the ones who track every deduction, every month, all year.
Want a CPA to review your deductions and find what you’re missing? Reach out to us, and we’ll go through your prior year return and show you where the gaps are.
