What Can Landlords Deduct on Schedule E in 2026?

If you're a small landlord filing Schedule E, the honest answer is: most landlords leave real money on the table by underclaiming legitimate deductions — especially depreciation. The eligible categories are broad, and each one gets subtracted from rental income before you owe a dollar of tax.

Okoniq Property Hub keeps every deductible expense tagged by property and category so Schedule E is a report, not a research project. Here's the full deduction list.

Which deductions are the biggest for most landlords?

Mortgage interest and property tax are usually the two biggest line items. Interest on a loan used to acquire, build, or improve the rental is fully deductible on Schedule E (not itemized separately). Property tax on the rental is 100% deductible with no SALT cap — the SALT cap only applies to itemized deductions on your primary residence.

For a $250,000 rental with a $200,000 mortgage at 7%, that's roughly $14,000 in mortgage interest plus $3,000–$6,000 in property tax — often $17,000–$20,000 in deductions from just those two lines.

What operating expenses count?

Anything ordinary and necessary to operate the rental:

• Repairs (not improvements — see our repair vs. improvement guide)
• Insurance premiums (landlord policy — see landlord vs. homeowners insurance)
• HOA / condo fees
• Utilities you pay (water, sewer, garbage, sometimes internet)
• Advertising (Zillow, Rentometer, print, signs)
• Cleaning and maintenance between tenants
• Supplies (light bulbs, air filters, batteries)
• Property management fees (a manager's fee is 100% deductible)
• Travel to and from the property (mileage log required — see how to track rental expenses)
• Legal and professional fees (attorney, CPA, eviction filing costs)

The IRS's canonical list is in Publication 527 — a landlord's essential reading.

What about depreciation?

Depreciation is the deduction most owners miss — and it's often worth more than any other line item. The IRS treats the building (not the land) as wearing out over 27.5 years for residential rentals. So a rental with a $220,000 building value (after subtracting land) generates roughly $8,000 of depreciation deduction every year — a paper expense that lowers taxable income without costing you a dime out of pocket.

You're not allowed to skip depreciation to "save it for later." If you don't claim it, the IRS still treats it as claimed for basis-recapture purposes at sale — so you get the worst of both worlds. Claim it every year.

Appliances, carpet, and equipment inside the rental depreciate on shorter schedules (5–15 years) and may qualify for Section 179 or bonus depreciation — see Section 179 vs. bonus depreciation for rentals.

Are there deductions specific to short-term rentals?

Yes — and short-term rentals (Airbnb-style, average stay ≤ 7 days) can actually leave Schedule E for Schedule C, which changes the deduction landscape (self-employment tax applies, but so does QBI deduction and full loss deductibility). This post focuses on standard long-term Schedule E rentals; talk to your CPA if you're mostly short-term.

Keep every expense organized for Schedule E

Schedule E isn't hard if the underlying data is clean. It falls apart if it's a shoebox in April. Okoniq Property Hub tags every receipt by property and category, so Schedule E is a one-click export at year end. See also: how to track rental property expenses for taxes and the Taxes & Accounting hub.

Frequently asked questions

Can I deduct my time working on the rental?

No. The IRS doesn't allow a deduction for the value of your own labor. If you paid a contractor, deduct the payment. If you did it yourself, deduct only the materials.

Are HOA special assessments deductible?

Regular HOA fees on a rental are deductible operating expenses. Special assessments for repairs are also generally deductible in the year paid. Special assessments for capital improvements (a new roof, new pool) get added to basis and depreciated instead.

What if my expenses exceed my rental income?

That's a passive loss. Whether you can deduct it against non-rental income depends on your income level and whether you're an "active participant" or "real estate professional." Losses that can't be used this year carry forward until you have offsetting rental income or you sell the property.

Not tax advice. Rental taxation has real complexity — passive-loss rules, at-risk rules, depreciation recapture. Confirm your specific situation with a licensed CPA. Okoniq Property Hub helps small landlords keep every receipt ready for Schedule E. Get started free.