Top Tax Deductions for Real Estate Investors: What You Can and Can’t Deduct

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At Cornerstone CPA, we work closely with real estate investors every day, and one question we hear time and again is: “What exactly can I write off on my taxes?” It’s a smart question. The tax code offers real advantages for real estate professionals, but only if you know the rules.

In this post, we’ll walk you through the most valuable deductions available to you, and highlight the ones that don’t qualify, so you can keep more of what you earn and avoid costly missteps.

Top Tax Deductions You Can Take

1. Mortgage Interest

If you're financing your investment property, the interest paid on those loans is tax-deductible, often one of the largest deductions available.

2. Depreciation

Depreciation is a powerful non-cash deduction that spreads out the cost of your property over 27.5 years for residential real estate. Even if your property's value is increasing, the IRS still lets you claim depreciation annually.

3. Property Taxes

State and local property taxes on rental or investment properties are fully deductible.

4. Repairs and Maintenance

Quick reminder: Repairs are deductible, but improvements must be capitalized. A leaking faucet? Deduct it. A kitchen remodel? Depreciate it.

5. Professional Services

Working with a CPA firm like ours? Good news: legal, accounting, property management, and consulting fees tied to your investment activities are all deductible.

6. Operating Expenses

Think utilities, HOA dues, landscaping, insurance premiums, if it keeps your property running, it likely qualifies.

7. Travel Expenses

Miles driven to check on your rental, meet contractors, or scout investment opportunities? You can deduct either mileage or actual vehicle expenses. Just keep a clean log.

8. Marketing and Advertising

Whether you’re paying for professional photography, Zillow ads, or yard signs, these costs are fully deductible as part of your rental business.

9. Home Office Deduction

If you run your real estate business from a dedicated space in your home, you may qualify for the home office deduction, an often overlooked tax benefit.

Expenses You Can’t Deduct

Let’s set the record straight, these commonly misunderstood expenses aren’t deductible:

✘ Capital Improvements

Big-ticket upgrades (like new HVAC systems or additions) must be capitalized and depreciated, not deducted in full the year they're paid.

✘ Personal Expenses

Only expenses tied directly to your rental business are deductible. That includes travel and meals. Personal use? Off-limits.

✘ Pre-Rental Costs

If your property isn’t yet available for rent, many expenses incurred during that downtime may not be deductible until it's officially “in service.”

✘ Fines and Penalties

IRS and city penalties, HOA fines, and late fees? No deductions allowed.

Cornerstone CPA Tip: Documentation Is Your Best Friend

A well-organized tax file can mean the difference between a smooth deduction and a red flag during an audit. We recommend keeping digitized receipts, mileage logs, and a separate bank account for property-related transactions.

Let’s Talk Strategy

Our mission is to help real estate investors like you leverage the tax code legally and strategically. If you're not sure whether you're maximizing your deductions, or want help tracking them throughout the year, schedule a consultation with our real estate advisory team. We’re here to help you plan proactively, not just react in April.

Conclusion

Smart tax strategy starts with knowing what you can (and can’t) deduct. These rules can seem complicated, but when applied correctly, they’re one of the best tools for building long-term wealth through real estate.