Tax on Rental Income

So, you finally did it. You bought a rental property! Welcome to the world of passive income, appreciation, and… complicated tax rules.

If you’ve started researching rental property taxes, you might already feel overwhelmed.

“Do I have to pay self-employment tax on rental income?”
“What can I deduct to lower my tax bill?”
“How does depreciation work?”

If this sounds familiar, you’re not alone. Most first-time landlords go through the same confusion. But don’t worry, we’ve got you covered.

At Insogna CPA, a trusted Austin, Texas CPA firm, we help real estate investors like you maximize deductions, stay IRS-compliant, and keep more of your hard-earned rental income. Let’s break it all down in simple, no-BS terms so you can handle tax season like a pro.

How Rental Property Income is Taxed (Without the Confusion)

First things first: Yes, rental income is taxable. But it’s not the same as getting taxed on your paycheck.

Key things to know:

• Rental income is considered passive income, so it’s NOT subject to self-employment tax.
• You’re taxed on your profit, not just total rent collected, which means deductions are your best friend.
• You report rental income and expenses on Schedule E of your tax return.

The key takeaway? The IRS wants their cut, but they also give landlords plenty of tax breaks if you know how to use them.

The Best Rental Property Tax Deductions (AKA, How to Pay Less in Taxes)

Owning rental property comes with a lot of deductible expenses—which means more tax savings for you.

Here are the top deductions every landlord should know about:

✔ Mortgage Interest – Your biggest tax write-off. Interest on your rental loan? Fully deductible.

✔ Property Taxes – State and local property taxes can be written off on your return.

✔ Repairs & Maintenance – Fixing a broken AC, patching up leaks, or replacing an appliance? Deductible.

✔ Insurance Premiums – Rental property insurance, liability coverage, and even umbrella policies can be deducted.

✔ Property Management Fees – If you hire someone to handle tenants and maintenance, their fees are a write-off.

✔ Utilities (If You Pay Them) – If you cover water, gas, or electricity, those expenses are deductible too.

✔ Travel Expenses – If you drive or fly to check on your rental, you can deduct mileage, flights, and even lodging—if the trip is business-related.

Pro Tip: Keep receipts for everything. The IRS loves documentation, and a simple spreadsheet (or using an app like QuickBooks) can make tax time way easier.

Depreciation: The Secret Tax Advantage of Owning Rentals

One of the biggest tax benefits of real estate? Depreciation.

What is Depreciation?

Depreciation allows you to spread out the cost of your property over 27.5 years, lowering your taxable income every single year.

What Can You Depreciate?

• The cost of the building (not the land).
• Big improvements (new roof, HVAC, flooring).
• Appliances and furniture used for the rental.

Example: Bought a rental for $275,000? If the building is worth $200,000, you can deduct about $7,272 per year in depreciation. That’s a major tax break.

Mistake to avoid: Not claiming depreciation. It’s required, and if you don’t claim it now, the IRS will still tax you later when you sell the property.

How Insogna CPA helps: As an experienced CPA in Austin, Texas, we make sure you get every depreciation deduction you’re entitled to without IRS headaches.

Passive vs. Active Income: What It Means for Your Taxes

Not all rental income is taxed the same. Your classification as a passive or active investor impacts how much you can deduct.

Passive Income (Most Landlords)

• Rental income is passive by default (which is a good thing—it avoids self-employment tax).
• Passive losses (like depreciation) can only offset passive income not your W-2 salary.
• If your total income is under $150,000, you may be able to deduct up to $25,000 in passive losses per year.

Active Income (Real Estate Professionals)

If you spend 750+ hours per year managing properties, you may qualify as a real estate professional—which means you can deduct rental losses against ALL income (including W-2 earnings).

How Insogna CPA helps: Not sure where you fall? We’ll analyze your situation and ensure you’re using the best tax strategy.

How to Report Rental Income (Without Screwing It Up)

You’ll report all rental income and expenses on Schedule E (Form 1040).

What you’ll need:

• Total rent collected
• Expense records (utilities, repairs, insurance, etc.)
• Depreciation calculations
• Mortgage interest and property tax statements

Common mistakes to avoid:

• Forgetting to report all rental income (yes, that includes security deposits used for repairs).
• Misclassifying repairs vs. improvements (repairs = immediate deduction, improvements = depreciated over time).
• Not tracking travel costs (visiting your rental for business? Deductible).

How Insogna CPA helps: As a leading Austin accounting service, we handle the complex reporting for you, ensuring no deductions are missed and no IRS mistakes happen.

Rental Property Tax Checklist for First-Time Landlords

✔ Keep organized records of all income and expenses.
✔ Claim every deduction possible (mortgage interest, insurance, repairs, etc.).
✔ Use depreciation to lower taxable income.
✔ Know if your rental income is passive or active.
✔ File your rental property taxes properly on Schedule E.

Want to pay less in taxes and avoid IRS headaches? Let’s make sure you’re set up for success.

Need Help with Rental Property Taxes? We’ve Got You.

Real estate investing should build your wealth not drain it with unnecessary taxes. Let Insogna CPA handle the tax side, so you can focus on growing your investments...

Schedule a consultation today with Insogna CPA, your go-to Austin, TX accountant, and start maximizing your rental tax savings!

Summary of What This Blog Covers:

• Breaks Down Common Misconceptions About LLCs for Real Estate
  This blog clarifies widespread myths about forming an LLC for rental properties like the false belief that it automatically saves on taxes or provides blanket liability protection and explains what it actually does (and doesn’t) offer.
  
  
• Compares LLCs and Umbrella Insurance for Liability Coverage
  Readers learn the real differences between forming an LLC and buying umbrella insurance, helping them decide which structure better suits their rental strategy based on cost, protection, and simplicity.
  
  
• Explains the Tax Impact and Compliance Requirements of LLCs
  The post dives into the tax implications of LLC ownership, including pass-through taxation, additional filing obligations, and why most rental LLCs don’t reduce tax liabilities without proper planning.
  
  
• Provides a Strategic Framework for Long-Term Portfolio Planning
  With guidance from a trusted Austin, Texas CPA firm, readers discover when an LLC makes sense for scaling, estate planning, 1031 exchanges, and reducing risk alongside tips for staying compliant and future-ready.

So, you bought a rental property. Maybe it’s your first, maybe it’s the fifth deal you’ve closed this year (look at you go). Either way, the monthly income is rolling in, the tenants are texting you less often than expected, and your equity is climbing.

Then the question hits:
 “Should I put my rental property in an LLC?”

If you’ve been anywhere near a real estate investing podcast, Facebook group, or late-night investor Reddit thread, you’ve probably heard:

• “You HAVE to use an LLC! What if someone sues you?”
  
  
• “It’s a tax strategy! You’ll save thousands!”
  
  
• “No one seriously invests without one!”
  
  

But here’s the thing: the truth is more nuanced.

At Insogna CPA, a leading Austin, Texas CPA firm, we work with rental property owners, landlords, and real estate investors every day. We help clients make strategic, not emotional, decisions because an LLC is a legal structure, not a magic shield.

Let’s dig into the real pros, cons, tax implications, and legal considerations of using an LLC for your rental property and how to know if it’s truly right for you.

What Most Investors Get Wrong About LLCs

LLCs are often misunderstood in the rental real estate space. The myths swirl faster than a bidding war in a hot market.

Let’s set the record straight.

Myth #1: An LLC protects everything

LLCs can protect your personal assets but only if you manage them correctly. That means:

• Maintaining a separate bank account
  
  
• Keeping detailed books
  
  
• Filing necessary documents
  
  
• Treating it like a business, not a side hustle
  
  

Otherwise, a court can pierce the corporate veil and you’re personally on the hook.

Myth #2: An LLC automatically reduces your taxes

Wrong again. Most rental property LLCs are pass-through entities. That means your income flows through to your personal tax return, where it’s taxed the same as if you owned the property outright.

Myth #3: You don’t need insurance if you have an LLC

We wish it were that simple. The LLC structure protects your personal assets, not the asset itself. You still need robust landlord insurance and possibly an umbrella policy to cover lawsuits, accidents, and property damage.

As your trusted Austin, TX accountant, our job isn’t to sell you on an LLC. It’s to guide you to the smartest structure for your goals, your risk profile, and your portfolio growth plans.

LLC vs. Umbrella Insurance: A Practical Comparison

We’ve had this conversation hundreds of times. Most investors want to know if they can get the protection of an LLC without the red tape. Enter: umbrella insurance.

Here’s a side-by-side comparison:

Our recommendation:

• For first-time landlords or small portfolios, umbrella insurance may be all the protection you need.
  
  
• If you have multiple properties, partners, or significant personal assets, adding LLCs can create strategic risk separation.
  
  

At Insogna CPA, a seasoned tax consultant near you, we help you evaluate your entire risk profile and build a structure that doesn’t just work now but works as you scale.

When Does an LLC Make Sense for Your Rental Property?

Let’s get real: LLCs are not bad. They’re just often misused or misunderstood.

Here’s when they really shine:

✅ You own multiple rental properties

An LLC can separate liabilities and shield your entire portfolio from a single incident. We often recommend one LLC per property or using a Series LLC where available.

✅ You plan to bring on partners

LLCs allow you to outline ownership percentages, responsibilities, and profit-sharing in a formal operating agreement. Something you’ll want before anyone wires a dime.

✅ You’re investing across state lines

Out-of-state properties come with registration and filing obligations. Forming an LLC can help centralize your operation, especially if you plan to scale across markets.

✅ You have a high net worth

If you’ve built significant personal assets, an LLC offers an added layer of legal protection if managed properly.

⚠️ When might you not need an LLC?

• You own one or two rental units and have a solid insurance policy
  
  
• You’re renting a part of your primary residence
  
  
• You live in a state with high LLC fees (looking at you, California—$800 per year)
  
  

Working with an experienced small business CPA in Austin, we help you assess the real risk vs. reward.

The Tax Reality: What an LLC Actually Does (and Doesn’t)

Here’s where investors really get tripped up.

What an LLC doesn’t do:

• It does not automatically reduce your taxes
  
  
• It does not add new deductions
  
  
• It does not change your income classification
  
  

In most cases, your LLC will be taxed as a disregarded entity, meaning the income lands on your personal return via Schedule E. You’ll still claim depreciation, mortgage interest, repairs, and other common deductions.

What it can do:

• Help you track income and expenses more cleanly
  
  
• Allow for tax elections (like an S-corp) if you’re offering substantial services
  
  
• Enable partner profit splitting and other planning opportunities
  
  

And yes, forming an LLC may create extra tax filings:

• State-level franchise taxes
  
  
• Annual reports and fees
  
  
• Possible need for a separate CPA-prepared return for your LLC
  
  

This is why rental property investors choose Insogna CPA for tax preparation services near them. We keep your filings organized, compliant, and optimized for long-term gain.

Compliance Isn’t Optional (If You Want Protection to Stick)

If you decide to form an LLC, great. But now it’s time to treat it like a real business.

You’ll need to:

• Open a separate LLC bank account
  
  
• Maintain clean books (we provide services accounting to help with this)
  
  
• File state-specific forms and franchise taxes
  
  
• Keep W9 tax forms for vendors and file 1099 NECs when needed
  
  
• File an FBAR if your rental income flows through a foreign account
  
  

The IRS and courts want to see that your LLC is operating separately from your personal finances. If you co-mingle funds or fail to document income, your protection could be voided.

Need help managing this? We’re a licensed CPA near you with a deep bench of experts including enrolled agents, certified general accountants, and chartered public accountants ready to keep your structure airtight.

Thinking Bigger? Let’s Talk Long-Term Planning

Forming an LLC isn’t just about today, it’s about preparing for tomorrow.

Whether you’re planning a 1031 exchange, transferring properties to your children, or building a real estate brand, your structure matters.

We help clients:

• Build multi-LLC portfolios
  
  
• Navigate SALT deduction limits with pass-through entity taxes
  
  
• Reduce audit exposure
  
  
• Manage multi-state rental tax filings
  
  
• Maximize depreciation and cost segregation strategies
  
  
• Set up trusts or holding companies for legacy planning
  
  

We don’t just check boxes. As one of the most responsive Austin accounting firms, we think about where your business is going and how to get you there faster.

Why Real Estate Investors Choose Insogna CPA

If you’ve ever searched for a “tax advisor near me” and landed on someone who just files returns, congrats, you’ve done the bare minimum.

But if you want more: real strategy, tailored advice, proactive insights, that’s where we come in.

Here’s what sets us apart:

• Deep specialization in rental property tax planning
  
  
• Concierge-level service from a trusted CPA in Austin, Texas
  
  
• A full team of certified public accountants, taxation accountants, and real estate-savvy experts
  
  
• Integrated support for your LLCs, trusts, and multi-entity holdings
  
  

You don’t just get a tax return. You get a roadmap.

Before You File That LLC Paperwork, Let’s Talk

Still wondering whether an LLC makes sense for your situation?

Let’s figure it out together. Schedule a consultation with Insogna CPA, your go-to Austin, TX accountant, and we’ll review your properties, goals, and financial picture to help you make the smartest move for your portfolio.

Because you didn’t build all this just to hand it over to legal fees, tax filings, or avoidable mistakes. You built it for freedom, growth, and peace of mind.

Let’s make sure your structure reflects that...

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!

So, you’ve got rental properties in multiple states—great for building wealth, not so great for tax season. Each state has its own tax rules, filing deadlines, and quirky laws that can turn your simple tax return into a multi-page, multi-state puzzle.

If you’re not careful, you could overpay, miss deductions, or even get hit with penalties. And let’s be real: your money should be going toward growing your investments, not filling state tax coffers.

That’s where we come in. Insogna CPA, a leading Austin, Texas CPA firm, helps real estate investors like you simplify multi-state tax filings, maximize deductions, and avoid expensive mistakes. Here’s why having a specialized CPA in your corner is a must when investing across state lines.

1. Every State Has Its Own (Annoying) Tax Rules

Think tax laws are the same everywhere? Nope.

Some states tax your rental income, some don’t. Some have reciprocity agreements, while others require non-residents to file a return even if you only made a few hundred dollars.

The problem? You could be filing taxes in places you don’t need to or worse, skipping a required filing and racking up penalties.

✔ The solution: A CPA in Austin, Texas (hi, that’s us) who understands multi-state tax laws and makes sure you’re only filing where necessary, saving you time and money.

2. Your LLC Structure Could Be Costing You Thousands

LLCs are great for asset protection but when it comes to taxes? It’s all about strategy.

Here’s where investors go wrong:

• Some states charge franchise taxes just for having an LLC (looking at you, California).
• Others require extra filings and fees for out-of-state LLCs.
• The wrong setup could increase your tax burden instead of reducing it.

✔ The fix: A small business CPA in Austin can help you structure your LLCs the right way, so you don’t end up overpaying in unnecessary state taxes.

3. State Tax Agencies Love Penalties (and You Could Be Next)

Mess up your multi-state filings, and you might get a surprise letter from a state tax agency. (Hint: It’s never a thank-you note.)

Miss a deadline? That’s a penalty.
Forget to report income? Another penalty.
File in the wrong state? You guessed it—penalty.

✔ The solution: A top-rated Austin tax accountant who keeps you ahead of deadlines and in the clear with every state you invest in.

4. Some States Limit Passive Losses (AKA, Your Tax Strategy Needs an Upgrade)

If you’re using passive losses (like depreciation and mortgage interest) to offset rental income, you better hope your state allows it.

• Some states cap how much passive loss you can deduct in a single year.
• Others don’t allow passive loss deductions until you sell the property.

✔ How we help: As an expert tax advisor in Austin, we make sure you’re using every deduction possible while staying compliant with state-specific rules.

5. Without Planning, You Could Pay Taxes Twice on the Same Income

Paying one state its share of taxes is enough. Paying two states? That’s just rude.

Double taxation happens when:

• The state where your property taxes you as a non-resident.
• Your home state also taxes that same income, without giving you a credit.

✔ The solution: A CPA firm in Austin, Texas that ensures you get state tax credits, take advantage of reciprocity agreements, and structure your income smartly to avoid overpaying.

6. A Specialized CPA Saves You Time, Money & Headaches

Let’s be real: multi-state tax laws aren’t something you want to Google at 2 AM.

A specialized Austin accounting firm makes sure you’re:

• Optimizing your tax strategy for multiple states.
• Never missing a deadline.
• Maximizing deductions so you keep more of your rental income.

Hiring a specialized CPA isn’t just about compliance, it’s about keeping more money in your pocket while making tax season stress-free.

Multi-State Taxes Don’t Have to Be a Nightmare

Managing rental properties across different states shouldn’t mean spending hours trying to figure out tax laws. Let’s make it simple.

Schedule a consultation today with Insogna CPA, your trusted Austin TX accountant—and let’s get your multi-state tax strategy dialed in...

So, you’ve built a real estate empire (or at least a solid rental portfolio) but now the tax man is knocking on doors in multiple states. Sound familiar? If managing multi-state tax filings feels more confusing than reading legal jargon in a lease agreement, you’re not alone.

Each state has its own set of tax rules, deadlines, and quirks. Mess it up, and you could be paying more than you should or, worse, facing penalties. And let’s be real: you didn’t invest in real estate to fund state governments.

That’s where Insogna CPA, a top-rated Austin, Texas CPA firm, comes in. We help real estate investors cut through the tax noise and keep more of what they earn. Let’s talk about how you can stop overpaying and start making multi-state taxes work in your favor.

The Problem: Multi-State Taxes Are a Mess

Owning properties in different states? That’s great for cash flow but not so great for your tax return. Here’s what makes multi-state taxes such a headache:

• Every state has different filing rules. Some states tax rental income, some don’t. Some states require a return even if you made $1 in income. (Yes, really.)
• Double taxation is a real threat. Without the right strategy, you could get taxed in two states on the same income. Spoiler: That’s not how you build wealth.
• Deadlines are all over the place. The IRS has its deadlines, and so does every state. Keeping track of it all? Not exactly your idea of fun.
• You might be missing out on deductions. Some states let you take depreciation deductions, while others are more stingy. If you don’t know the rules, you’re leaving money on the table.

Sounds stressful? It doesn’t have to be. Let’s fix it.

The Solution: A Smarter Multi-State Tax Strategy

The goal is simple: pay what you owe but not a penny more. Here’s how to get multi-state taxes under control and make sure you’re keeping as much of your rental income as possible.

1. Figure Out Where You Actually Need to File

Not every state needs a tax return from you. Some do. Some don’t. Some states have reciprocal agreements that let you skip filing in certain places. Others? Not so much.

Here’s the rule of thumb:
 ✔ Own rental property there? You probably need to file.
 ✔ Earn money from a partnership or LLC based there? You might need to file.
 ✔ Spend a significant amount of time there? You could be a tax resident (even if you don’t want to be).

Pro Tip: At Insogna CPA, a trusted CPA in Austin, Texas, we go through your portfolio to make sure you’re not filing more returns than necessary or skipping a state you should be filing in.

2. Don’t Let One State Tax You Twice

Double taxation is every real estate investor’s nightmare. If you’re earning rental income in one state but live in another, you might get hit with taxes in both.

How to prevent it?
 ✔ State tax credits – Your home state might give you a credit for taxes paid elsewhere (but you need to claim it properly).
 ✔ Reciprocity agreements – Some states let you skip filing if you already pay taxes where you live.
 ✔ Strategic entity structuring – With the right setup, you might be able to avoid state taxes altogether.

Pro Tip: A tax advisor in Austin (that’s us!) can run the numbers and make sure you’re not overpaying.

3. Keep Up with State-Specific Deadlines

Each state has its own tax deadline, and they don’t always match the IRS schedule. Miss one? You could be looking at penalties, late fees, and extra paperwork.

How to stay ahead:

• Keep a tax calendar with deadlines for each state.
• Work with a CPA firm that tracks everything for you (like Insogna CPA, an Austin accounting firm that loves keeping investors on track).

We make sure our clients never miss a state filing deadline because penalties are not a good use of your hard-earned cash.

4. Get Every State-Specific Deduction You Deserve

Not every state plays by the same rules when it comes to tax deductions. What you can write off depends on where your property is and how you set up your rental business.

For example:

• Depreciation rules – Some states limit or disallow bonus depreciation. Others let you take the full deduction.
• Pass-through entity taxes (PTETs) – In some states, LLCs and partnerships can pay taxes at the entity level to help investors bypass federal SALT deduction limits.
• 1031 exchanges – Certain states tax 1031 exchange proceeds even if you reinvest in another property.

Pro Tip: As a leading Austin small business accountant, we dive into state tax codes to make sure you’re not missing out on deductions that could save you thousands.

5. Work with a CPA Who Specializes in Multi-State Tax Planning

Not all CPAs understand the complexities of multi-state real estate investing. If you’re dealing with multiple state tax returns, you need a firm that:
 ✔ Knows which states require filings and which don’t.
 ✔ Understands multi-state tax credits to avoid double taxation.
 ✔ Can help structure your real estate investments for tax efficiency.

At Insogna CPA, a top-rated CPA firm in Austin, Texas, we do more than just file your taxes—we help you plan smarter so you keep more of your money.

Why Choose Insogna CPA?

• We make taxes easy. We handle the tough stuff so you can focus on growing your real estate portfolio.
• We’re proactive, not reactive. No last-minute surprises, just smart tax strategies that keep you ahead of the game.
• We actually care. You’re not just another tax return to us. We partner with you to make sure your investments are set up for long-term success.

Stop Overpaying in Multi-State Taxes

Real estate investing shouldn’t come with a tax nightmare. Let’s fix it—together.

Schedule a consultation today with Insogna CPA, your go-to Austin, TX accountant, and let’s get your multi-state tax strategy dialed in...

Summary of What This Blog Covers:

• Explore Essential Tax Strategies for Short-Term Rentals
  Learn how to reduce your tax burden through smart planning like expense tracking, depreciation, and understanding how to classify your rental income for maximum savings.
• Unlock Hidden Deductions and Tax-Free Opportunities
  From deducting pre-service costs and home office expenses to leveraging the 14-day rental rule for tax-free income, discover overlooked ways to keep more of what you earn.
• Get Pro Tips on Compliance and Filing Requirements
  Understand what forms (like W9s, 1099 NEC, and FBAR filings) you need to stay compliant, and how to avoid common pitfalls with help from a licensed CPA and trusted tax advisor.
• Partner with a Trusted Austin CPA for Year-Round Support
  See how Insogna CPA—one of the top CPA firms in Austin, Texas—offers proactive, concierge-level service tailored specifically to real estate investors and short-term rental hosts.

Running a short-term rental isn’t just about guest messages and five-star reviews. It’s a business. One that can bring in excellent income if you manage it wisely. And that includes your tax strategy.

At Insogna CPA, a highly rated Austin, Texas CPA firm, we help rental property owners not just survive tax season, but use it as a launchpad for bigger financial wins. From first-time hosts to seasoned real estate investors, we work with clients across the country to turn short-term rental income into long-term wealth.

So grab your notebook (or your favorite accounting app), and let’s break down 7 powerful tax strategies that can help you keep more of your hard-earned income.

1. Track Every Expense Like a Pro

If you want to keep your taxes lean, you’ve got to track everything. And we mean everything.

That includes:

• Cleaning and turnover costs
• Property management fees
• Airbnb, VRBO, or platform commissions
• Utilities, insurance, and HOA dues
• Repairs, supplies, and small upgrades

Every deductible expense lowers your taxable income and it adds up fast. But the IRS won’t just take your word for it. You need clean records.

Tools like QuickBooks Self-Employed or other expense management apps can streamline this, especially if you’re juggling multiple properties. Or we can help you build a spreadsheet or connect software that syncs with your bank.

And as your CPA near you, we’ll help you categorize those expenses correctly, so you don’t miss a single deduction or trigger a red flag during an audit.

2. Supercharge Depreciation with Cost Segregation

Cost segregation is one of the most powerful but underutilized tax strategies available to short-term rental owners.

Here’s how it works: Instead of depreciating your property evenly over 27.5 years (for residential rentals), we break down your property into categories:

• Appliances and interior finishes → depreciated over 5 years
• Flooring and lighting → 7 years
• Landscaping and outdoor features → 15 years

By front-loading your depreciation, you unlock larger tax deductions in the early years when most property owners need the cash flow most.

At Insogna CPA, we coordinate with certified engineers to conduct IRS-compliant cost segregation studies, then integrate those results into your return. If your rental is worth over $500,000 or has recently been renovated, this is a must-explore strategy.

It’s one of many reasons we’re a go-to small business CPA in Austin for real estate investors.

3. Deduct Pre-Service Expenses

Did you start racking up costs before your first guest ever checked in? Good news. You may be able to deduct them.

Eligible pre-service expenses include:

• Repairs to get the space rent-ready
• Furniture and appliances
• Professional photography and advertising
• Mortgage interest while prepping the property

The catch? You need to officially place your property “in service” before December 31 to deduct these expenses in the current tax year. That means it must be ready and available for rent even if it doesn’t have a booking yet.

We’ll help you document this correctly, so your return reflects every eligible expense and aligns with IRS expectations. As your experienced Austin, TX accountant, we’ve helped dozens of clients time this correctly to maximize their deductions.

4. Choose the Right Tax Classification (It Matters)

Depending on how you operate your short-term rental, your income may be considered:

• Passive income (Schedule E)
• Active business income (Schedule C)

Here’s the difference:

• Schedule E: You don’t provide substantial services (like daily cleanings or meals). You avoid self-employment tax, but can’t deduct business-related expenses like a home office.
• Schedule C: You offer guest services. You can deduct more, but you’re also subject to self-employment tax so planning is key.

As your dedicated Austin tax accountant, we’ll help you assess how you operate, calculate your self-employment tax, and choose the setup that saves you the most money while keeping you compliant.

5. Deduct Travel Expenses When You Visit Your Property

Whether your property is across town or across the country, travel for business purposes is often deductible.

Eligible expenses include:

• Mileage and fuel (track it!)
• Flights and lodging
• Rental cars or rideshares
• Meals while traveling for repairs, maintenance, or management

Keep receipts and a mileage log. As your certified public accountant near you, we’ll ensure you know what’s deductible, what’s not, and how to keep everything audit-proof.

Even better? We’ll set you up with templates and systems to automate the process.

6. Claim the Home Office Deduction (The Right Way)

Do you use a dedicated space in your home to:

• Manage bookings and guest communication
• Track finances
• Coordinate vendors or maintenance
• Store supplies?

If so, you may qualify for the home office deduction.

This deduction lets you write off:

• A portion of your rent or mortgage
• Utilities and internet
• Office supplies or tech

To qualify, the space must be used exclusively for business but it doesn’t have to be a whole room. A dedicated desk or section of a room can work.

As a highly rated Austin accounting service, we’ll assess your setup and make sure your home office deduction is calculated accurately and fairly.

7. Tap into the 14-Day Rule for Tax-Free Income

Here’s a sweet tax loophole you don’t want to miss.

If you rent your home (or second property) for 14 days or fewer in a calendar year, you don’t have to report that income at all.

You read that right. It’s completely tax-free. This applies even if you rent it out at peak rates during festivals or major events.

The bonus? You may still be able to deduct property taxes and mortgage interest, depending on how the home is used for the rest of the year.

Need help deciding whether this applies? We’ll run the numbers. As your reliable tax consultant near you, we specialize in short-term rental strategy so you’ll always have a clear picture of your best move.

Bonus: Stay Compliant with the Right Tools and Forms

To keep your deductions safe and your return bulletproof, make sure you’re working with the right tools and filings:

Common tax forms and filings for short-term rental owners:

• W9 forms for contractors or service providers
• 1099 NEC forms for vendors paid over $600
• 1099-K forms if you earn over $20,000 or have 200+ transactions on Airbnb/VRBO
• Schedule C or Schedule E, depending on how you’re taxed
• FBAR filing, if you have foreign accounts holding rental income
• A self-employment tax calculator to estimate quarterly payments (when applicable)

We keep our clients organized and compliant with IRS standards. Whether you need help issuing 1099s or filing your FBAR on time, we’re the CPA firm in Austin, Texas that handles it all.

Why Choose Insogna CPA?

Let’s be honest. There’s no shortage of tax firms or online tools out there. But if you want strategy, precision, and a team that treats your rental like the business it is, Insogna CPA is your partner.

We offer:

• Year-round tax strategy, not just seasonal filing
• A hands-on, concierge approach to every client
• Real estate and rental tax expertise tailored to your goals
• Transparent, proactive communication every step of the way

Whether you need help with a 1031 exchange, cost segregation, self-employment tax planning, or just want to know what that Airbnb 1099 form actually means, we’re here for it.

As one of the most trusted CPA firms in Austin, we help rental owners grow with confidence.

Ready to Make Your Short-Term Rental More Profitable?

You’ve already built something valuable. Now let’s make it more rewarding.

Schedule a consultation with Insogna CPA and get personalized, proactive advice on how to lower your tax burden, increase your cash flow, and make smarter financial decisions for your short-term rental.

It’s time to turn your side income into a long-term asset with strategy, clarity, and the support of a certified CPA near you who actually cares.