Taxes & accounting
General information, not legal or tax advice. Landlord-tenant and tax rules vary by state, county, and city and change often. Confirm against current statute or a licensed professional in the relevant jurisdiction before acting.
For landlords
Res + Com
Most individual landlords report rental income and expenses on Schedule E of Form 1040, with one column per property. You list gross rents received, then deduct operating expenses — repairs, management fees, insurance, mortgage interest, property tax, and utilities you pay — and depreciation. The net flows to your 1040, and losses may be limited by the passive-activity rules.
The work is really bookkeeping discipline: if income and expenses are tagged to the right property all year, Schedule E becomes a copy-paste. Collabrio's EZ Accounting tags every entry to a property and produces a Schedule E-ready report, so year-end isn't a shoebox-of-receipts scramble.
For landlords
Res + Com
A repair keeps the property in ordinary operating condition — fixing a leak, patching drywall, repainting a room — and is fully deductible in the year you pay it. An improvement betters, restores, or adapts the property — a new roof, a full HVAC replacement, a room addition — and must be capitalized and depreciated over 27.5 years (residential) or 39 (commercial).
The IRS 'BAR' test (Betterment, Adaptation, Restoration) draws the line, and safe harbors — the de minimis safe harbor and the small-taxpayer safe harbor — let you expense smaller items outright. Misclassifying improvements as repairs is a classic audit trigger, so document the work and keep the invoices.
For investors
Res + Com
Depreciation lets you deduct the building's cost — but not the land — over its useful life: 27.5 years straight-line for residential rental property and 39 years for commercial. You can also use cost segregation to break out shorter-life components (appliances, flooring, land improvements) and depreciate them faster, pulling deductions forward.
The trade-off comes at sale: depreciation recapture taxes the benefit you took (up to 25% on the recaptured portion) unless you defer it through a 1031 like-kind exchange. Collabrio tracks 27.5- and 39-year schedules per asset alongside your capital improvements.
For investors
Res + Com
Two 2025 changes matter for rental owners. Bonus depreciation, which had been phasing down, was restored to 100% for qualifying property acquired after January 19, 2025 — letting you immediately expense shorter-life assets, which a cost-segregation study often surfaces. Separately, the Section 179 maximum expensing limit rose to $2.5 million for tax years beginning in 2025.
Both let you accelerate deductions, but they interact with the passive-loss limits, so a big first-year write-off may not be fully usable against other income. Model it with your CPA before counting on the cash benefit.
For investors
Res + Com
Rental real estate is generally treated as a 'passive activity,' so paper losses (often driven by depreciation) usually can't offset your W-2 or active-business income. Instead they're suspended and carried forward until you have passive income or sell the property.
There are two main relief valves: an up-to-$25,000 special allowance for landlords who actively participate (it phases out between $100,000 and $150,000 of modified AGI), and 'real estate professional' status, which can make rental losses non-passive if you meet strict material-participation and hours tests. Both are worth a conversation with your tax advisor.
For landlords
Residential
Ordinary and necessary rental expenses are deductible: mortgage interest, property taxes, insurance, repairs and maintenance, property-management and leasing fees, advertising, utilities you pay, HOA dues, legal and accounting fees, travel to the property, supplies, and depreciation. What's not deductible: the principal portion of your mortgage payment, improvements (those get capitalized and depreciated), and the value of your own labor.
The difference between a clean deduction and a lost one is usually the receipt. Collabrio attaches receipts directly to each ledger entry and tags them by property, so everything you're entitled to deduct is documented and exportable for your CPA.
Less guesswork, one system of record
Collabrio keeps the dated photos, ledgers, leases, and audit trail
that turn these questions into a five-minute lookup.
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