Rental Expenses

In most cases, the expenses of renting your property, such as maintenance, insurance, taxes, and interest, can be deducted from your rental income.

Personal use of rental property. If you sometimes use your rental property for personal purposes, you must divide your expenses between rental and personal use. Also, your rental expense deductions may be limited. See chapter 5.

Part interest. If you own a part interest in rental property, you can deduct expenses you paid according to your percentage of ownership.

Example. Roger owns a one-half undivided interest in a rental house. Last year, he paid $968 for necessary repairs on the property. Roger can deduct $484 (50% (0.50) × $968) as a rental expense. He is entitled to reimbursement for the remaining half from the co-owner.

When To Deduct

You generally deduct your rental expenses in the year you pay them.

If you use the accrual method, see Pub. 538 for more information.

Types of Expenses

Listed below are the most common rental expenses.

• Advertising.

• Auto and travel expenses.

• Cleaning and maintenance.

• Commissions.

• Depreciation.

• Insurance.

• Interest (other).

• Legal and other professional fees.

• Local transportation expenses.

• Management fees.

• Mortgage interest paid to banks, etc.

• Points.

• Rental payments.

• Repairs.

• Taxes.

• Utilities.

Some of these expenses, as well as other less common ones, are discussed below.

4 Chapter 1 Rental Income and Expenses (If No Personal

Use of Dwelling)

Publication 527 (2025)

Depreciation. Depreciation is a capital expense. It is the mechanism for recovering your cost in an income-producing property and must be taken over the expected life of the property.

You can begin to depreciate rental property when it is ready and available for rent. See Placed in Service under When Does Depreciation Begin and End? in chapter 2.

Insurance premiums paid in advance. If you pay an insurance premium for more than 1 year in advance, you can’t deduct the total premium in the year you pay it. For each year of coverage, you can deduct only the part of the premium payment that applies to that year.

Interest expense. You can deduct mortgage interest you pay on your rental property. When you refinance a rental property for more than the previous outstanding balance, the portion of the interest allocable to loan proceeds not related to rental use generally can’t be deducted as a rental expense.

Expenses paid to obtain a mortgage. Certain expenses you pay to obtain a mortgage on your rental property can’t be deducted as interest. These expenses, which include mortgage commissions, abstract fees, and recording fees, are capital expenses that are part of your basis in the property.

Form 1098, Mortgage Interest Statement. If you paid $600 or more of mortgage interest on your rental property to any one person, you should receive a Form 1098 or similar statement showing the interest you paid for the year. If you and at least one other person (other than your spouse if you file a joint return) were liable for, and paid interest on, the mortgage, and the other person received the Form 1098, report your share of the interest on Schedule E (Form 1040), line 13. Attach a statement to your return showing the name and address of the other person. On the dotted line next to line 13, enter “See attached.”

Legal and other professional fees. You can deduct, as a rental expense, legal and other professional expenses such as tax return preparation fees you paid to prepare Schedule E, Part I. For example, on your 2025 Schedule E, you can deduct fees paid in 2025 to prepare Part I of your 2024 Schedule E. You can also deduct, as a rental expense, any expense (other than federal taxes and penalties) you paid to resolve a tax underpayment related to your rental activities.

Local benefit taxes. In most cases, you can’t deduct charges for local benefits that increase the value of your property, such as charges for putting in streets, sidewalks, or water and sewer systems. These charges are nondepreciable capital expenditures and must be added to the basis of your property. However, you can deduct local benefit taxes that are for maintaining, repairing, or paying interest charges for the benefits.

Local transportation expenses. You may be able to deduct your ordinary and necessary local transportation expenses if you incur them to collect rental income or to

manage, conserve, or maintain your rental property. However, transportation expenses incurred to travel between your home and a rental property generally constitute nondeductible commuting costs unless you use your home as your principal place of business. See Pub. 587, Business Use of Your Home, for information on determining if your home office qualifies as a principal place of business.

Generally, if you use your personal car, pickup truck, or light van for rental activities, you can deduct the expenses using one of two methods: actual expenses or the standard mileage rate. For 2025, the standard mileage rate is 70 cents a mile. For more information, see chapter 4 of Pub. 463.

To deduct car expenses under either method, you must keep records that follow the rules in chap

If you use your vehicle for both business and per-