Owning rental property or your own business has its share of challenges, but there are numerous tax deductions that real estate investors and business owners should be leveraging to maximize their returns. Surprisingly, many investors fail to take full advantage of these deductions when filing their returns for the 2024 and 2025 tax years.
Most investors are aware of common deductions like mortgage interest, property taxes, insurance, and ordinary operating expenses such as maintenance and repairs. However, there are many lesser-known deductions that can significantly impact an investor's tax liability. Below is a comprehensive list of tax deductions that real estate investors should be aware of:
Loan Interest & Debt-Related Expenses
Non-Mortgage / Private Funding Loan Interest
Interest and points on private loans, hard money loans, or personal credit lines used for real estate investments are deductible. This includes loans for renovations, down payments, or operating expenses.
Interest on Loans Through Infinite Banking
Interest paid on loans borrowed against whole/index universal life insurance policies (infinite banking) for real estate investments may be deductible, provided the funds are used for business purposes.
Mortgage Prepayment Penalties & Refinancing Costs
If you pay off a mortgage early and incur a prepayment penalty, that cost can be deducted. Similarly, loan refinancing fees, appraisal costs, and origination fees can be amortized over the life of the loan.
Credit Card and Business Banking Fees
Credit card and business banking fees include charges such as annual fees, late payment fees, interest, transaction fees, bank account maintenance fees, wire transfer charges, and merchant processing fees. These costs, including fees for credit card transactions and payment processing, are generally deductible as business expenses if they are related to business operations.
Property-Related Expenses
Personal Property Taxes
Taxes on business-use vehicles, equipment, or mobile homes are deductible if based on the asset's value (ad valorem).
HOA & Condo Association Fees
HOA fees for rental properties are deductible, but not for personal residences. Condo association fees are similarly deductible, though special assessments for improvements must be depreciated.
Insurance (Beyond Property Insurance)
Liability, rent loss, umbrella, and workers’ compensation insurance for rental properties are deductible. These protect against tenant claims, lost rental income, and business liabilities.
Storage Unit Costs
Storage fees for maintaining business-related items like furniture, appliances, and business supplies are deductible. This applies as long as it’s used exclusively for business purposes. If storing items at home, consider the home office deduction instead.
Renting Furniture or Other Assets
Leasing furniture for short-term rentals, staging properties, or office equipment is a deductible expense. Ideal for furnished rentals, real estate businesses, office spaces, etc.
Landscaping & Lawn Care
Regular mowing, tree trimming, and seasonal maintenance for rental properties help maintain curb appeal and tenant satisfaction. These recurring expenses are fully deductible.
Pest Control & Extermination Services
Whether it's routine pest prevention or emergency extermination, keeping your property pest-free is an essential, deductible expense. This includes one-time treatments and ongoing maintenance plans.
Security & Alarm Systems
Expenses for installing and maintaining security cameras, alarm systems, and smart locks are deductible. These systems enhance property safety and can be attractive to tenants.
Environmental & Sustainability Upgrades
Investments in solar panels, energy-efficient HVAC systems, LED lighting, and water conservation improvements may qualify for deductions or tax credits. Some local and federal programs provide additional incentives.
Marketing & Advertising
Advertising & Marketing
Costs for marketing properties through online ads, flyers, photography, and websites are fully deductible. Keep records by property for better tax planning.
Home Staging & Photography
Professional staging, furniture rental, and high-quality photography can help attract buyers or renters faster. These marketing expenses are deductible as part of your real estate business operations.
Signage for Rental & Sale Properties
Costs for printing and placing "For Rent" or "For Sale" signs, including banners and vehicle magnets, are deductible. This also includes digital signage and billboards used to market properties.
Tenant & Property Management
Tenant Screening & Background Checks
Application fees for credit reports, background checks, and rental history verification are deductible. These costs help ensure reliable tenants and reduce potential rental risks.
Eviction Costs
Legal fees, court costs, and expenses related to tenant evictions, including locksmith services and property cleanup, are deductible. Proper documentation is essential to substantiate these claims.
Property Management/Co-Hosting Fees
Fees paid to a property management company for day-to-day operations of your rental properties, such as tenant placement, rent collection, and maintenance, are deductible.
Real Estate Attorney Fees
Legal fees for lease drafting, evictions, dispute resolution, etc. related to rental properties are deductible.
Cleaning & Janitorial Services
Move-in/move-out cleanings, Airbnb turnover services, and maintenance cleaning costs are deductible. Cleaning supplies and hired services qualify, but personal labor does not.
Supplies & Office Expenses
Short-Term Rental Supplies
For Airbnb or vacation rentals, expenses for linens, toiletries, kitchenware, and restocking essentials are deductible. These costs ensure a comfortable guest experience and keep your rental competitive.
Storage Rent
Fees for renting storage units to hold business supplies are deductible. Alternatively, home office deductions may apply if the items are stored at home.
Office Rent & Utilities
Rent, utilities, and maintenance costs for dedicated office space are deductible. Home-based businesses can deduct a portion if they qualify for the home office deduction.
Office Supplies
Common office expenses like paper, pens, printer ink, business stationery, and postage are deductible. Keep receipts to track these small but recurring costs.
Phone & Internet Bills
A business phone line and internet service can be deducted if used for work purposes. If using a personal plan, only the business-related portion is deductible, so maintaining a separate business line may be beneficial.
Software & Subscriptions
Costs for real estate CRMs, MLS access, accounting software (e.g., QuickBooks), marketing platforms, and business productivity tools are deductible. Even cloud storage and project management tools like Dropbox or Trello qualify.
Employee & Contractor Costs
Payroll for Employees
If you have property managers, leasing agents, administrative assistants, or other salaried employees, their wages, payroll taxes, and benefits are deductible business expenses.
Independent Contractors
Payments to handymen, electricians, plumbers, landscapers, and other 1099 contractors who assist in maintaining your properties or business operations are deductible. Be sure to issue 1099 forms as required.
Virtual Assistants & Admin Support
Hiring remote assistants for bookkeeping, tenant communication, scheduling, or marketing is deductible. Many real estate investors and agents outsource administrative tasks to improve efficiency.
Business Development & Strategy
Cost of Business Planning & Strategy
Fees paid to financial advisors, business strategists, real estate coaches, and tax/bookkeeping consultants are deductible. These professionals help optimize investment strategies and improve profitability.
LLC & Entity Maintenance Fees
The costs of forming and maintaining an LLC, including state filing fees, registered agent costs, and franchise taxes, are deductible. Keeping your entity compliant is a necessary business expense.
Tax Credits for Real Estate Investors
Investors may qualify for Low-Income Housing Tax Credits (LIHTC), historic property rehabilitation credits, or energy-efficiency incentives. These can significantly reduce tax liabilities and improve overall returns on investment.
Business Meals & Networking
When meeting with real estate agents, property managers, or potential investors, meals and networking expenses may be partially deductible. Keep receipts and document the business purpose to substantiate the deduction.
Meals with Spouses
If your spouse is actively involved in your business, meals where business discussions take place may qualify as deductible business meals. Document the purpose and topics discussed to support the deduction.
Education & Training
Books, courses, seminars, conferences, real estate certifications, and industry memberships qualify as deductible business expenses if they enhance your skills or knowledge in your field. This includes mentors and masterminds.
Business Travel Expenses
Departing from Home Office to another Business Location
If you have a qualified home office that serves as your principal place of business, you can deduct travel expenses starting from your home, rather than your first business-related stop. This is especially useful for real estate investors, agents, and business owners who frequently visit properties, clients, or networking events.
Transportation & Lodging
Flights, train tickets, rental cars, rideshares, etc., for business-related travel (for example, real estate conferences, property scouting, or client meetings) including lodging and hotel stays qualify for deductions.
Meals During Business Travel
Meals while traveling for business are generally 50% deductible. Documentation of business purpose is required.
Business Trips Mixed with Vacation
If a trip includes both business and personal activities, only the business-related expenses (such as airfare, lodging, meals for workdays, conferences, networking events, real estate site visits, etc.) are deductible. The weekend sandwich rule allows business travelers to extend a business trip over the weekend and still deduct travel & lodging expenses, as long as the trip is primarily for business. If the weekend break falls between two business days, the travel expenses for the additional days can still be deducted, as long as the main purpose of the trip remains business-related.
International Business Travel
If traveling abroad for real estate deals, tax planning, or business expansion, airfare, lodging, and meals are deductible if the trip is primarily business-related.
Per Diem Allowance
Instead of tracking each expense, business owners can use IRS per diem rates to deduct set amounts for lodging, meals, and incidentals when traveling.
Vehicle & Transportation Expenses
Standard Mileage Deduction
When deducting business mileage using the IRS standard mileage rate, you cannot separately deduct fuel, maintenance, depreciation, insurance, or loan interest. However, parking, tolls, and certain travel-related costs remain deductible.
Vehicle Expenses (Actual Expense Method)
For real estate investors or business owners, vehicle-related expenses are deductible under the actual expense method, including lease payments, loan interest, fuel costs, maintenance, repairs, depreciation, insurance premiums, registration fees, and roadside assistance memberships. These expenses must be apportioned based on the percentage of business use.
Special Deductions & Miscellaneous
Pets for Security & Pest Control
If a pet, such as a guard dog or a cat for pest control, is used primarily for business purposes (e.g., securing a home office or rental property), related costs may be deductible. This includes food, veterinary care, and training expenses for animals serving a legitimate business function.
Charitable Deductions for Donated Assets & Scraps
If you donate old cabinets, appliances, fixtures, or furniture from renovations to organizations like Habitat for Humanity, you may qualify for a charitable tax deduction. Be sure to keep receipts and a fair market value assessment of the donated items for tax reporting.
Charitable Donations That Can Double as Advertising
If you sponsor local events, donate to charities in exchange for advertising, or fundraisers where your business name is promoted, these expenses can often be deducted as a marketing expense instead of a charitable donation.
Health Insurance Premiums
Business owners who provide health insurance for employees can deduct the cost of premiums. Self-employed individuals may also be eligible for deductions on their own coverage.
Retirement Plan Contributions
If you operate as a business entity, contributions to SEP IRAs, Solo 401(k)s, or other employer-sponsored retirement plans can be deducted. These plans offer tax advantages while helping build long-term wealth.
Paying Family Members/Friends Who Help Your Business
If family members or friends perform legitimate work for your business, you can compensate them and deduct those wages as a business expense. Ensure they receive proper documentation (e.g., W-2s or 1099s) to remain compliant with tax laws.
Home Office Costs & Renovations
A dedicated home office allows you to deduct expenses such as a percentage of rent/mortgage, utilities, furniture, and office renovations. To qualify, the space must be used exclusively for business activities.
Vacation Costs When Business Activities Are Prioritized
If you attend real estate conferences, property inspections, or business meetings while traveling, a portion of transportation, lodging, and meals may be deductible. Keep records proving the primary purpose was business-related.
Augusta Rule (IRC Section 280A)
This rule allows homeowners to rent out their home for up to 14 days per year tax-free. Real estate investors can use this strategy by renting their home to their business for meetings and deducting the rental expense while keeping the rental income tax-free.
Gifts for Clients, Leads, Prospects, and Employees
Gifts given to clients, leads, partners, and employees can be deductible, though they are subject to a $25 per person annual limit. However, branded gifts (such as marketing materials) or entertainment expenses may qualify for higher deductions.
Uniforms and Branded Clothing
Uniforms and branded clothing are deductible if they are required for business purposes, not suitable for everyday wear, and used exclusively for work, such as branded polos or safety gear. Additionally, clothing used for promotional purposes, like giveaways or employee gifts, can qualify as advertising expenses or business gifts. Keep detailed records to support the deductions.
Properly tracking and claiming these deductions can significantly reduce your tax liability and improve your real estate business's profitability. Work with a knowledgeable CPA or tax advisor like me to ensure compliance and maximize your tax savings.
Have questions about tax deductions for your real estate investments? Let’s discuss how you can optimize your tax strategy today!
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