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Rental-property tax deductions: keep the full financial picture

Eligible rental expenses can reduce taxable rental income. Common categories include mortgage interest, rental-property taxes, insurance, repairs, cleaning and maintenance, advertising, management fees, utilities you pay, and qualifying professional fees. Mortgage principal is not a rental expense deduction.

Residential rental buildings generally use 27.5-year depreciation under the standard federal system; land is not depreciable. Improvements usually require capitalization rather than an immediate repair deduction.

Live in one unit of a two-family home? Allocate shared expenses between personal and rental use. Only the rental portion qualifies as a rental expense. Keep invoices, payment records, and a reasonable allocation method.

These are ordinary rental-property tax rules, not a special deduction for accepting a voucher. Agency-paid rent is generally rental income, not a tax-free donation. Deductions reduce taxable income rather than reimbursing an expense dollar for dollar. Passive-loss and other limits may apply; your tax professional should confirm the treatment for your ownership structure and tax year.

IRS Publication 527: rental expenses, depreciation, and mixed personal/rental use.

Know what your accountant should review

Keep a property-by-property record of rent received, authorized incentives, expenses, repairs, capital improvements, and reimbursements. Advance rent generally must be reported when received by a cash-basis taxpayer. Refundable security deposits generally are not income when received if they must be returned; amounts retained or applied as rent have different treatment.

Bring your accountant the lease, agency payment notices, tax statements, and any security or reimbursement documentation. Ask how each payment should be classified, when it is taxable, and how any reimbursement affects deductions. A security voucher is not the same thing as a cash deposit received.

IRS rental income and recordkeeping guidance.

Building-specific opportunities to review

SCRIE and DRIE: these rent-freeze programs can give owners tax abatement credits equal to an eligible tenant’s exempted rent increase. They require a qualifying tenant and qualifying housing; they are not an automatic credit for every voucher tenancy.

SCRIE owner information • DRIE owner information.

Section 610: some regulated affordable-housing projects can receive approved rental assistance above the legal regulated rent without increasing the tenant’s share. This is a rent-authorization pathway, not a tax deduction. A qualifying regulatory agreement, required riders, and agency approval are essential.

Current NYCHA restriction: its published FAQ says new Section 610 regulatory increases approved on or after April 1, 2026 are not being processed; projects with qualifying agreements amended and executed before that date may still apply. Check the actual subsidy agency before relying on this opportunity.

HPD Section 610 requirements • NYCHA current restrictions.

J-51 R: eligible rehabilitation of qualifying existing buildings may support property-tax abatements. HPD currently accepts eligible work completed on or before June 29, 2026, subject to application deadlines and other requirements. Its current notice says work completed afterward is not yet eligible pending City action. Do not assume a new repair project qualifies today.

J-51 R eligibility and current program notice.

485-x: qualifying new multifamily construction and eligible conversions may receive property-tax exemptions. Building size, location, affordability, labor, and other program requirements matter. Accepting voucher tenants in an existing building does not automatically qualify the building.

485-x development eligibility.

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