So, you finally did it. You bought a rental property. Welcome to the world of passive income, appreciation, and… confusing tax rules.
Suddenly, TurboTax is throwing terms at you like depreciation schedules, passive loss limitations, and repair vs. improvement classifications—and let’s be real, you didn’t sign up for this level of accounting homework.
Sound familiar? You’re not alone. Many first-time rental property owners start out thinking they can handle their taxes solo, only to realize that one wrong move could cost them thousands in missed deductions or unnecessary taxes.
The good news? You don’t have to figure this out on your own. At Insogna CPA, a leading Austin, Texas CPA firm, we help rental property owners like you take advantage of every deduction, minimize tax liabilities, and keep more of your hard-earned money. Let’s dive into the biggest rental property tax mistakes and how to avoid them.
The Problem: Rental Property Taxes Are Not as Simple as You Think
Most landlords assume that filing rental income is just like adding another W-2 to your tax return until they realize:
- Depreciation isn’t optional (and skipping it is a huge mistake).
- Not all repairs are deductible right away (some have to be depreciated over time).
- Tracking expenses in a spreadsheet isn’t enough (the IRS loves documentation).
- An LLC isn’t always the tax-saving magic people think it is.
Without a solid strategy, you could end up paying way more than necessary or even making errors that could trigger an audit.
But don’t worry. We’ve got your back.
The Solution: Smart Tax Moves for Rental Property Owners
Here’s how to avoid the biggest tax pitfalls and make sure you’re maximizing your savings.
1. Don’t Miss Out on Rental Property Tax Deductions
The best part about owning rental property? The tax deductions. (Well, that and the extra cash flow.)
Some of the biggest tax breaks for landlords include:
✔ Mortgage interest – This is often the largest deduction.
✔ Property taxes – Yes, they’re deductible.
✔ Repairs & maintenance – Fixing a broken AC? Deductible.
✔ Insurance premiums – Rental property insurance = tax break.
✔ Travel expenses – If you visit your rental for maintenance or management, you can deduct mileage and travel costs.
What NOT to do: Assume all expenses are deductible right away. The IRS separates repairs (immediate deduction) from improvements (must be depreciated over time). Get this wrong, and you could be overpaying or missing deductions.
How Insogna CPA helps: As an expert Austin tax accountant, we make sure you’re claiming every possible deduction without raising red flags with the IRS.
2. Use Depreciation to Lower Your Taxable Income
Depreciation is like a built-in tax discount for rental property owners. The IRS lets you deduct a portion of your property’s value every year over 27.5 years (for residential rentals).
What you can depreciate:
- The cost of the building (but not the land).
- Certain improvements like HVAC systems, roofs, and plumbing.
- Appliances and furniture used in the rental.
What NOT to do: Forget to claim depreciation. Miss this, and you’re leaving serious money on the table.
How Insogna CPA helps: As a leading CPA in Austin, Texas, we handle all the calculations so you get every dollar you’re entitled to.
3. Supercharge Your Savings with Cost Segregation
Want to accelerate your depreciation deductions and save even more on taxes? Enter cost segregation.
Here’s how it works: Instead of depreciating your entire property over 27.5 years, you separate things like flooring, lighting, and appliances into shorter depreciation categories (5, 7, or 15 years).
Why it’s a game-changer:
✔ Boosts your deductions in the early years of owning the property.
✔ Reduces your taxable income significantly.
✔ Keeps more cash in your pocket for reinvestment.
Who should consider this? Cost segregation works best for properties worth $500,000+, but even smaller properties can benefit.
How Insogna CPA helps: We connect you with cost segregation specialists and ensure the strategy is integrated into your tax return. (No guesswork, just savings.)
4. Should You Put Your Rental Property in an LLC? Maybe.
LLCs are great for liability protection, but they don’t always save you money on taxes.
Here’s why:
- Some states (like California) charge high annual fees for LLCs.
- An LLC doesn’t automatically change how your rental income is taxed.
- Depending on your situation, a different entity structure might be better.
What NOT to do: Assume an LLC is always the best choice without talking to a tax advisor in Austin.
How Insogna CPA helps: We evaluate your specific rental portfolio and recommend the best structure for liability protection and tax efficiency.
5. Work with a CPA Who Specializes in Rental Property Taxes
Let’s be real. DIY tax software isn’t built for real estate investors. It can’t:
- Help you plan for future tax savings.
- Catch errors that could trigger an audit.
- Give you a strategy to minimize taxes as your portfolio grows.
If you own rental property, having the right CPA in your corner is a game-changer.
How Insogna CPA helps:
✔ Maximizes your deductions while keeping you IRS-compliant.
✔ Helps you avoid mistakes that could lead to overpaying or audits.
✔ Gives you a tax strategy that grows with your real estate investments.
Stop Overpaying on Rental Property Taxes—We’ve Got You Covered
Owning rental property is about building wealth, not overpaying in taxes due to missed deductions or poor tax planning.
Let’s make sure you’re keeping more of your rental income where it belongs—in your pocket...
Schedule a consultation today with Insogna CPA, your trusted Austin, TX accountant, and let’s build a tax strategy that works for you!