Tax Season Tips for Landlords

Key Takeaway

1. What Counts as Rental Income: Rental income isn’t limited to monthly rent—it also includes advance payments, retained security deposits, tenant-paid expenses, and even bartered services. Knowing what qualifies helps ensure accurate tax reporting.
2. Maximize Deductions to Reduce Taxable Income: Landlords can deduct expenses like depreciation, insurance premiums, maintenance costs, and property management fees. Taking full advantage of these deductions can significantly reduce your tax burden.
3. Keep Thorough Records Year-Round: Strong documentation—including lease agreements, receipts, legal records, and past tax returns—is essential for claiming deductions and staying prepared for an audit.
4. Property Managers Simplifie Tax Season: A trusted property management company can handle record-keeping, expense tracking, and tax documentation—making your job easier and your business more compliant.

As a rental property owner, it’s essential to understand how the IRS taxes your rental income. While many think of rental income as just the monthly rent checks, the IRS takes a broader view.

Rental income can also include advance payments, lease termination fees, security deposits (if retained), tenant-covered expenses, and even services or goods exchanged in place of cash. 

Whether you’re new to real estate investing or have years of experience, knowing what counts as income and how to manage your tax responsibilities is critical. 

With economic shifts, rising rents, and tenant uncertainties still affecting the rental landscape, taking control of your tax strategy is more important than ever to protect your profits and stay compliant.

In this guide from Keller n’ Jadd Realty & Management, we’ll cover essential tax tips for landlords, common deductions, and strategies to help you stay organized year-round.

Know What Qualifies as Rental Income

When you lease out a property, the IRS considers almost all earnings tied to its use as rental income. 

This includes:

• Monthly Rent: The regular monthly price tenants make for occupying your property.
• Advance Rent: Payments made before they are due must be reported as income for the year received.
• Security Deposits: If a deposit is kept due to lease violations or damages, it becomes taxable income.
• Early Lease Termination Fees: Any compensation a tenant pays to break the lease counts as income.
• Tenant-Paid Expenses: If your tenant pays for things you would typically cover, such as utilities or repairs, that amount is considered income.
• Bartered Services or Goods: If tenants provide services (e.g., landscaping) in place of rent, the fair market value of that work must be reported as income.

Given the range of what qualifies, it's easy to see how managing rental property taxes can become complex. Staying on top of these details helps you avoid costly mistakes and maintain the financial health of your rental business.

Maximize Your Tax Savings with Key Deductions

One of the most effective ways to protect your rental income is by taking full advantage of available tax deductions. These deductions directly reduce your taxable income and can significantly improve your year-end bottom line.

Here are some major deductible expenses landlords can claim:

• Depreciation: The IRS allows you to recover the cost of your rental property over its useful life, typically 27.5 years for residential properties. This yearly depreciation deduction accounts for the wear and tear on your property and lowers your taxable income, even though it's a non-cash expense.
• Insurance Premiums: Premiums for landlord-specific insurance policies, including those covering liability, fire, or flood damage, are fully deductible. These are considered necessary business expenses for protecting your investment.
• Repairs and Maintenance: Routine repairs like fixing leaks, replacing broken windows, or repainting walls are deductible in the year they’re made. However, improvements that add long-term value, like roof replacements or kitchen remodels, must be capitalized and depreciated over time.
• Property Management Fees: If you hire a property management company, you can deduct their fees. These include costs related to tenant placement, rent collection, maintenance coordination, inspections, and overall administration.

Taking the time to understand and apply these deductions ensures you’re not leaving money on the table.

The Impact of The Pandemic

The COVID-19 pandemic disrupted the rental market, with eviction bans, shifting occupancy rates, and inconsistent rental income creating major challenges for landlords. Many tenants required financial aid, making it harder for property owners to maintain steady cash flow.

In response, federal and state relief programs, like the $25 billion rental assistance fund, offered temporary support. While direct payments have ended, landlords are still adapting to post-pandemic realities, including evolving tax laws and tenant regulations. 

For guidance, resources like Benefits.gov provide helpful tools, webinars, and updates.

Stay Organized with Strong Record-Keeping

To claim deductions and file accurately, documentation is crucial. Keeping your records in order throughout the year not only simplifies tax preparation but also protects you in case of an audit.

Important documents to maintain include:

• Lease agreements: Store signed contracts for each tenant.
• Legal and court records: Save documentation from inspections, disputes, fines, or legal actions.
• Permits and compliance: Retain copies of permits for repairs, renovations, and zoning changes.
• Insurance details: Keep copies of all policy declarations and updates.
• Loan and mortgage info: Track statements, payment history, and interest breakdowns.
• Receipts and invoices: Document all property-related expenses, including maintenance, utilities, advertising, and upgrades.
• Previous tax returns: Always hold on to past filings for future reference.

Well-maintained records serve as both a roadmap and a safety net for your rental operations and finances.

Filing Taxes Based on Ownership Type

Your tax filing process depends on how your rental property is owned:

• Individual Ownership: If you own the property under your name, you’ll file Schedule E with your 1040 tax return. This form details rental income and related deductions.
• Shared Ownership: Co-owners each report their share of income and expenses proportionally on their personal returns.
• Entity Ownership: If your property is owned by an LLC, corporation, or partnership, you’ll need to file more complex forms, such as Form 8825, in addition to your business tax return.

Knowing your ownership structure and filing obligations ensures you stay compliant with IRS requirements and avoid unnecessary penalties.

Partnering With a Property Management Company

Managing taxes for rental properties can be time-consuming and stressful, especially when combined with the demands of property maintenance, tenant relations, and regulatory compliance. 

This is where a reliable property management company can be a game-changer. An experienced team can:

• Track income and expenses accurately
• Ensure proper tax documentation and reporting
• Maximize available deductions
• Stay updated on changing tax laws
• Provide tenant screening, marketing, and rent collection
• Coordinate maintenance and repair work

By outsourcing these responsibilities, you can focus on growing your rental portfolio, knowing your business remains efficient, compliant, and profitable.

Bottom Line

Tax season doesn’t have to be overwhelming. By knowing what qualifies as income, claiming the right deductions, and keeping organized records, you can protect your profits and stay compliant.

For added ease, a reliable property management company can handle the complexities of taxes and day-to-day operations. Contact Keller n’ Jadd Realty & Management today to simplify your rental business—and gain peace of mind all year long!