Tax on Rental Income

You got into real estate to build wealth, not to hand over more than necessary to the IRS. But here’s the thing: many rental property owners overpay in taxes every year simply because they don’t know what they can deduct.

The tax code isn’t designed to be obvious, and tax software? It’s built for the masses, not for landlords looking to maximize their deductions. If you’re not working with an Austin Texas CPA who understands real estate, you could be leaving thousands on the table.

Here are seven often-overlooked tax deductions that every rental property owner should be claiming.

1. Depreciation – The Easiest Way to Lower Your Taxable Income

If you’re not taking full advantage of depreciation, you’re doing real estate taxes wrong.

Why It Matters:

• The IRS lets you write off a portion of your rental property’s value every year because, on paper, it’s “wearing down.”
• Residential rentals depreciate over 5 years, which means thousands in annual deductions.
• A cost segregation study can accelerate depreciation on things like appliances, flooring, and landscaping, allowing you to deduct more upfront.

How to Maximize It:

A real estate-savvy Austin tax accountant can ensure you’re structuring depreciation correctly and strategically to lower your taxable income.

2. Home Office Deduction – Managing Your Rentals Can Work in Your Favor

If you manage your properties from home, you might qualify for a home office deduction.

What You Can Deduct:

• A portion of your rent or mortgage interest
• Utilities like electricity and internet
• Office furniture, business software, and computers

What You Need to Know:

Your home office must be exclusively used for managing your rental properties. No, working from the kitchen table doesn’t count.

If you’re unsure how to structure this, an Austin small business accountant can help make sure you’re maximizing deductions without raising red flags.

3. Travel & Mileage – Because Property Visits Add Up

Think about how often you drive to your rental property—whether it’s for repairs, tenant meetings, or inspections. Those miles are deductible.

What You Can Deduct:

• 67 cents per mile (IRS rate for 2024)
• Flights, hotels, and rental cars for out-of-state property visits
• Meals if you travel overnight for rental-related purposes

Pro Tip:

The IRS loves documentation so track your mileage and receipts carefully. A tax advisor in Austin can help ensure you’re claiming these deductions the right way.

4. Utility & Maintenance Costs – Stop Paying More Than You Need To

If you cover utilities for your rental property, those expenses are fully deductible.

Examples of Deductible Costs:

 ✔ Electricity, gas, and water
 ✔ Trash collection
 ✔ Internet and cable (if included in the lease)

Regular maintenance expenses like HVAC servicing, pest control, and landscaping are also deductible.

The Catch:

Major upgrades (like a new roof or HVAC system) must be depreciated over time instead of deducted all at once. A CPA firm in Austin, Texas can help you properly categorize expenses so you get the biggest tax advantage.

5. Property Tax & Insurance – Two Big Deductions You Can’t Forget

Your property taxes and insurance premiums are major expenses, but they’re also fully deductible.

What’s Included?

 ✔ Annual property taxes
 ✔ Landlord insurance premiums
 ✔ Flood or earthquake insurance
 ✔ Umbrella policies for extra liability protection

Many landlords overlook umbrella policies, which provide additional liability coverage. An Austin accounting firm can ensure every eligible insurance deduction is accounted for.

6. Record-Keeping – The Key to Unlocking Every Deduction

A messy tax filing system = lost money. If you’re not tracking your expenses properly, you’re almost guaranteed to miss out on deductions.

Best Practices for Maximizing Deductions:

✔ Use separate bank accounts and credit cards for rental property expenses
 ✔ Keep receipts, invoices, and mileage logs organized
 ✔ Work with an Austin accounting service to streamline your bookkeeping

Not only does this keep more money in your pocket, but it also protects you in case of an IRS audit.

7. Why a CPA Can Uncover Deductions You Didn’t Know Existed

Even experienced landlords miss out on tax-saving opportunities simply because they don’t know what to look for.

How a CPA Can Help:

 ✔ Identify hidden deductions that tax software overlooks
 ✔ Structure your taxes to minimize your liability
 ✔ Ensure IRS compliance so you don’t run into penalties
 ✔ Plan long-term strategies for future investments and tax deferrals

A real estate-savvy Austin, TX accountant doesn’t just file your taxes. They create a strategy that keeps more money in your pocket.

Maximize Your Deductions and Keep More of Your Rental Income

The difference between a standard tax return and a well-planned one? Thousands of dollars in tax savings every year.

If you’re not working with an expert, you could be overpaying the IRS year after year.

At Insogna CPA, we specialize in real estate tax strategies, helping property owners maximize deductions, reduce tax burdens, and stay compliant with IRS regulations. Whether you have one rental or an entire portfolio, our Austin accounting services are designed to help you keep more of what you earn.

Make sure you’re claiming every deduction possible. Schedule a tax planning session today...

Summary of What This Blog Covers:

• Introduces Cost Segregation as a Strategic Tax Tool for Women-Owned Businesses
  This blog explains how cost segregation accelerates depreciation on commercial properties, allowing women entrepreneurs to significantly reduce their taxable income and reinvest those savings into growth, hiring, or additional real estate investments.
  
  
• Clarifies When and How Cost Segregation Works
  It breaks down the difference between standard and accelerated depreciation, provides real-world examples of tax savings, and outlines which types of property owners—especially those who’ve purchased or renovated commercial real estate—can benefit from a cost segregation study.
  
  
• Covers IRS Compliance and Long-Term Planning Considerations
  From proper W9 and 1099 NEC filings to managing depreciation recapture through a 1031 exchange, the blog highlights the importance of working with a certified public accountant who ensures full IRS compliance and helps business owners plan strategically for future property sales.
  
  
• Positions Insogna CPA as a Trusted Tax Partner for Women Entrepreneurs
  The blog emphasizes how Insogna CPA supports clients beyond tax filing, offering real estate-specific tax strategy, cost segregation coordination, and a full-service approach tailored to the goals and values of women-led businesses.

You’ve Built the Business. Now Let’s Make Sure Your Property Is Working for You, Too.

Owning commercial property is more than a real estate move, it’s a strategic investment. It signals growth, stability, and long-term vision. And for women entrepreneurs especially, it’s a bold step toward independence and equity in a space historically dominated by others.

But here’s something most business owners aren’t told: your property can do more than house your business. It can reduce your tax bill. Significantly.

At Insogna CPA, a woman-focused Austin, Texas CPA firm, we work with business owners who are ready to look beyond surface-level savings and make tax strategy an active part of their wealth-building plan.

Enter: cost segregation.

If you’ve purchased or renovated commercial property, and no one has mentioned this strategy to you, it’s time we had a conversation.

What Is Cost Segregation?

Cost segregation is a tax strategy that accelerates depreciation on commercial real estate. Instead of treating your entire building as a single asset that depreciates slowly over 39 years, this strategy breaks down the property into faster-depreciating components. Giving you access to larger tax deductions early on.

Think of it like this: if your building is a cake, cost segregation lets you slice it into ingredients—flour, sugar, butter—so you can get a better understanding of its value. And in this case, a better way to write it off on your taxes.

How Standard Depreciation Works (The Slow Way)

Let’s walk through the traditional approach. If you purchase a commercial building for $1 million:

• Under IRS rules, you typically deduct around $25,600/year in depreciation
  
  
• That’s over 39 years to fully write off your building
  
  
• Meanwhile, your cash flow may be tight, and your need for capital is high, especially in the first few years of ownership
  
  

It’s not that the deduction isn’t useful. It’s just not enough, fast enough, when you’re trying to grow a thriving business.

The Cost Segregation Approach (The Strategic Way)

With cost segregation, your building is broken down into components with shorter depreciation schedules, such as:

• 5-year assets: Carpet, furniture, appliances, certain fixtures
  
  
• 7- to 15-year assets: Landscaping, sidewalks, parking lots, HVAC units
  
  
• 39-year assets: The structural building elements (roof, foundation)
  
  

Result:

You accelerate the depreciation of certain assets, resulting in much higher deductions in the first few years, precisely when you’re making your largest investments in staff, marketing, and expansion.

We work with engineers and tax specialists to conduct cost segregation studies and ensure the strategy is IRS-compliant, then our certified public accountants near you build the tax strategy around it.

Real-World Example: Cost Segregation in Action

Let’s say you purchase a building for $1 million, and $850,000 is allocated to the building (land doesn’t depreciate).

Without cost segregation:
 You take $21,794/year in straight-line depreciation.

With cost segregation:
 You might be able to write off $150,000–$250,000 in the first five years.

That could lower your tax liability by tens of thousands of dollars, freeing up capital you can use immediately.

Why Cost Segregation Matters for Women-Owned Businesses

Women-led businesses are growing at record rates but we also know that women business owners often reinvest more of their income back into their operations.

That means cash flow matters.

Cost segregation supports this reinvestment mindset by:

• Freeing up working capital that would otherwise be tied up in long-term depreciation
  
  
• Reducing taxable income in years when your business needs flexibility
  
  
• Supporting strategic goals like hiring, expanding, or entering new markets
  
  
• Helping you compete with larger companies that have long relied on this exact same strategy
  
  

As your Austin, TX accountant, we don’t just look at what the numbers say. We look at what they mean for your day-to-day business decisions and long-term goals.

Is Cost Segregation Right for You?

It could be, if you:

• Purchased a commercial property for $500,000 or more
  
  
• Made significant renovations or upgrades to an existing property
  
  
• Own retail, office, medical, warehouse, or hospitality space
  
  
• Operate a short-term rental property
  
  
• Plan to sell your property in the future and want to optimize tax timing
  
  

Even if you bought the property years ago, you may be able to apply cost segregation retroactively and recover missed deductions by amending past tax returns.

Your licensed CPA near you can help you explore this option safely and strategically.

How Insogna CPA Supports Women Entrepreneurs

At Insogna CPA, we offer more than just tax prep. We offer partnership, mentorship, and strategy for growth-minded business owners, especially women who are scaling their enterprises with purpose.

Here’s how we support you through the cost segregation process:

• We evaluate your property and improvements to determine the viability of a study
  
  
• We coordinate with certified cost segregation engineers for thorough, IRS-compliant reports
  
  
• We integrate the findings into your depreciation schedule and tax filings
  
  
• We guide you in reinvesting the tax savings for maximum long-term impact
  
  

Our team includes chartered public accountants, certified professional accountants, and taxation accountants who specialize in real estate, business ownership, and proactive planning.

We understand that you’re not just managing a property, you’re growing a vision.

What About IRS Compliance?

Let’s address the elephant in the room: yes, cost segregation is highly technical, and yes, the IRS watches closely. That’s why it’s critical to do it right the first time.

At Insogna CPA, we provide full compliance support, including:

• W9 tax form collection from contractors
  
  
• 1099 NEC filings for vendors paid $600+
  
  
• FBAR filing if your income involves foreign bank accounts
  
  
• Proper Schedule E or C classification, depending on how the property is used
  
  
• Audit support and proactive documentation strategies
  
  

Compliance isn’t just a box we check. It’s a mindset we build into your entire tax planning process.

Don’t Forget Depreciation Recapture And How to Manage It

If you’ve been depreciating property for years, and then sell, the IRS will want their cut back. It’s called depreciation recapture, and it’s typically taxed at 25%.

But there’s a solution: the 1031 exchange.

This strategy allows you to defer the taxes by reinvesting proceeds into a like-kind property. We’ve helped clients defer six-figure tax bills by coordinating 1031 exchanges across multiple states.

Our CPA firm in Austin, Texas handles:

• Exchange timelines and deadlines
  
  
• Coordination with qualified intermediaries
  
  
• Multi-state compliance for complex portfolios
  
  
• Real-time planning so you never get caught off guard
  
  

The Real Estate Tax Planning Checklist

Before you file, make sure you’ve:

✔ Evaluated your property for cost segregation opportunities
 ✔ Filed depreciation properly (including land/building split)
 ✔ Documented improvements vs. repairs
 ✔ Issued W9s and 1099s as needed
 ✔ Explored a 1031 exchange if you’re selling
 ✔ Discussed REPS or STR qualifications if applicable
 ✔ Partnered with a certified CPA near you who understands commercial property strategy

Why Women-Led Businesses Choose Insogna CPA

We’re more than a filing service. We’re a firm that champions women entrepreneurs, from first investment to exit planning.

Why our clients stay with us:

• We provide real-time tax help, not just once-a-year meetings
  
  
• Our team includes certified CPAs, enrolled agents, and certified general accountants
  
  
• We specialize in services accounting tailored to property owners
  
  
• We bring clarity to complex real estate tax rules
  
  
• We offer strategic planning that scales with your business and lifestyle goals
  
  

Whether you’re managing your first office space or scaling across states, we’re here to help you navigate the tax landscape with confidence and with a plan.

Let’s Put Your Property to Work for You

You invested in real estate for good reasons. Now it’s time to make sure that investment is working just as hard for your business as you are.

Book a consultation today with Insogna CPA, your trusted Austin tax accountant and strategic advisor for women-owned businesses. Together, we’ll explore whether cost segregation is right for you and start building a tax plan that reflects your vision, values, and next big step.

Because real estate isn’t just an asset, it’s a strategy. And you deserve to get every dollar of value from it...

Summary of What This Blog Covers:

• Debunks Five of the Most Costly Myths in Real Estate Tax Planning
  This blog breaks down common real estate tax misconceptions like whether you need an LLC, how rental income is taxed, and what expenses are actually deductible so investors can avoid mistakes that lead to overpaying the IRS.
  
  
• Explains Strategic Tax Tools for Smarter Real Estate Investing
  From cost segregation and depreciation schedules to Real Estate Professional Status (REPS) and short-term rental reclassification, the blog highlights advanced strategies that can reduce tax liability and increase cash flow for real estate investors.
  
  
• Covers Tax Compliance Essentials That Investors Overlook
  The blog stresses the importance of staying compliant with IRS requirements, including collecting W9s, filing 1099 NEC forms, tracking quarterly estimates, and preparing for depreciation recapture, all key responsibilities that can be streamlined with help from a trusted CPA firm in Austin, Texas.
  
  
• Highlights Why Working with a Specialized CPA Makes All the Difference
  Whether you’re a new investor or managing a growing portfolio, this blog explains why real estate tax planning requires more than tax software and how working with a licensed CPA near you who understands real estate can lead to long-term financial advantages.

Whether you’re a first-time rental property owner or scaling a multi-state portfolio, one thing is universal: taxes matter. A lot.

You’re in the real estate game to build wealth, not to become an expert in IRS publications or tax codes. But here’s the thing: if you rely on outdated advice or tax software alone, you could be overpaying the IRS every single year.

At Insogna CPA, a real estate-savvy Austin, Texas CPA firm, we help investors like you understand the difference between smart tax planning and missed opportunities. And it often starts with unlearning what you thought you knew.

Let’s break down five of the most common real estate tax myths and how to fix them so you can keep more of your hard-earned money.

1. “I Don’t Need an LLC for My Rental Property.”

Technically, you’re right. You don’t have to own your rental through an LLC. Many new investors start by holding property in their personal name and legally, that’s allowed.

But here’s what you’re not hearing:

• You’re personally liable. If a tenant sues you and you lose, your personal assets (your house, your car, your savings) are exposed.
  
  
• It may impact your financing. Some lenders prefer working with LLCs for investment properties. Others penalize you for not separating business and personal finances.
  
  
• You may be missing strategic tax benefits. When structured right, an LLC can help with estate planning, pass-through taxation, and separating your rental business from your personal finances.
  
  

At Insogna CPA, a go-to small business CPA in Austin, we help you weigh the pros and cons of forming an LLC, understand how it impacts taxes, and structure your portfolio for both protection and long-term growth.

2. “Rental Income Is Always Taxed in the Year I Receive It.”

This one trips up more investors than you’d think.

What’s true:

• Advance rent is taxable the year it’s received. Even if the payment covers next year, it’s income now.
  
  
• Security deposits are not taxable as long as they’re refundable and used only for damages.
  
  

But here’s what’s often missed:

• You’re taxed on net income, not gross rent. That means every deduction: depreciation, repairs, interest, property management reduces your taxable income.
  
  
• Depreciation can offset thousands in income.
  
  
• Carryforward losses can be used in future years.
  
  

A skilled Austin, TX accountant can help you structure and report rental income in a way that reduces your current and future tax burden.

3. “Everything I Spend on My Property Is Deductible.”

This one feels like it should be true. But the IRS sees things a little differently.

What’s immediately deductible:

• Repairs (fixing a leak, replacing a broken appliance)
  
  
• Property management fees
  
  
• Insurance premiums
  
  
• Advertising
  
  
• Travel to and from the property
  
  

What must be depreciated:

• Capital improvements (roof replacements, HVAC systems, new flooring)
  
  
• Appliances if part of an overall renovation
  
  
• Major upgrades to the structure or property systems
  
  

This distinction matters. Mislabeling an improvement as a repair could raise IRS scrutiny. That’s why our chartered professional accountants and taxation accountants walk you through each expense category, so nothing gets misfiled.

At Insogna CPA, a full-service Austin accounting firm, we make sure you know what qualifies for immediate deduction and what needs to be depreciated over time.

4. “I Don’t Need a CPA Until I Own Multiple Properties.”

We hear this one all the time, usually from folks who are now fixing avoidable mistakes from their first return.

The truth is, even one property can complicate your taxes more than you think.

Here’s why:

• Depreciation starts the moment your property is placed in service. If you don’t structure it right from the start, you could miss thousands in deductions.
  
  
• Entity structure matters from day one. Changing it later often involves legal fees and tax headaches.
  
  
• The IRS treats short-term rentals and long-term rentals differently. And that distinction matters.
  
  

Working with a CPA in Austin, Texas from the start means you’ll be able to optimize deductions, document everything properly, and stay IRS-compliant before tax season becomes a mad scramble.

5. “My Tax Software Catches All My Deductions.”

We love a good tech tool. But your tax software is only as smart as the person using it and it won’t ask the same questions a real CPA will.

What your tax software won’t do:

• Recommend a cost segregation study to accelerate depreciation
  
  
• Help you qualify for Real Estate Professional Status (REPS)
  
  
• Plan for 1031 exchanges to defer capital gains
  
  
• Distinguish between passive vs. non-passive income under IRS rules
  
  

Tax software is great for basic returns. But when you own rental property, have multiple income streams, or plan to scale your portfolio, you need real, human insight from a licensed CPA near you who specializes in real estate.

At Insogna CPA, one of the most responsive CPA firms in Austin, Texas, we build your tax strategy around your goals, not just your past income.

Thinking About Selling? Don’t Forget Depreciation Recapture

Let’s talk about what happens when you sell.

You’ve been deducting depreciation for years, great! But now the IRS wants a piece of that in the form of recapture tax, typically at 25%.

Want to avoid that hit?

Consider a 1031 exchange. This IRS-sanctioned strategy lets you sell one property, reinvest the proceeds into a new one, and defer taxes on both capital gains and depreciation recapture.

At Insogna CPA, we help investors:

• Navigate exchange timelines
  
  
• Coordinate with qualified intermediaries
  
  
• Ensure full IRS compliance
  
  
• Manage multi-state tax filings
  
  

Don’t wait until the sale closes. Talk to a tax advisor near you before your property hits the market.

Compliance Matters Even for the Savvy Investor

All the deductions in the world won’t help you if your filings aren’t correct.

That’s why our clients rely on us for:

• W9 tax form collection
  
  
• 1099 NEC filings for contractors paid over $600
  
  
• FBAR filing if rental income touches foreign bank accounts
  
  
• Schedule E vs. Schedule C classifications
  
  
• Quarterly estimate tracking and year-end tax planning
  
  

A proactive approach with your Austin accounting service means no surprises and a cleaner path to building wealth.

Real Estate Tax Planning Filing Checklist

Before you file, double-check that you’ve: ✔ Properly tracked and categorized all expenses
 ✔ Filed W9s, 1099 NECs, and FBAR forms
 ✔ Separated building vs. land value for depreciation
 ✔ Considered cost segregation for properties over $500,000
 ✔ Explored REPS or STR reclassification for passive loss deductions
 ✔ Planned for depreciation recapture or 1031 exchanges
 ✔ Partnered with a certified CPA near you who understands real estate

Why Real Estate Investors Choose Insogna CPA

You’re not just filing a return, you’re growing a business. You need more than software or a once-a-year tax meeting.

At Insogna CPA, your trusted Austin, TX accountant, we provide:

• Deep real estate tax experience across residential and commercial investments
  
  
• A full team of certified public accountants, chartered professional accountants, and taxation accountants
  
  
• Year-round tax help, including cost segregation analysis, entity structuring, and 1031 exchange tax strategy
  
  
• Personalized planning that scales with your portfolio
  
  
• One of the most responsive, client-focused CPA firms near you
  
  

Whether you’re navigating your first Schedule E or your tenth property sale, we’re here to help you plan smarter, file stronger, and keep more of what you earn.

Schedule Your Free Tax Review Today

Still wondering if your tax strategy is as strong as your investment strategy?

Let’s talk.

Book your free consultation with Insogna CPA, your real estate-focused Austin, Texas CPA, and let’s make sure your next return is more than just filed. It’s optimized for growth.

Because in real estate, it’s not about what you make. It’s about what you keep...

Summary of What This Blog Covers:

• Identifies Commonly Missed Real Estate Tax Deductions
  This blog highlights seven often-overlooked deductions that real estate investors frequently miss—such as home office expenses, mileage, depreciation, and marketing costs—and explains how to properly claim them with the help of a qualified CPA in Austin, Texas.
  
  
• Breaks Down Strategic Tax Tools Like Depreciation and Cost Segregation
  Learn how to maximize your deductions using tools like accelerated depreciation and cost segregation studies, helping you unlock tax savings now instead of over decades.
  
  
• Explains How to Leverage Real Estate Losses Against Other Income
  The blog dives into IRS rules around passive losses and introduces advanced strategies like Real Estate Professional Status (REPS) and the short-term rental loophole to help high-income investors reduce their overall tax burden.
  
  
• Emphasizes the Importance of Compliance and Long-Term Tax Planning
  From issuing W9 and 1099 NEC forms to planning for depreciation recapture and using 1031 exchanges, the blog outlines the key steps real estate investors must take to stay compliant and build a tax strategy that supports long-term wealth.

Let’s Be Honest: You Didn’t Get Into Real Estate to Talk Taxes

You’re here to build wealth, scale a portfolio, and maybe take a few well-earned breaks along the way, not to dig through IRS tax codes.

But here’s the hard truth: if you’re not maximizing your tax deductions, you’re losing money, possibly thousands every year.

At Insogna CPA, a trusted Austin, Texas CPA firm, we work with real estate investors every day from first-time landlords to full-time flippers. And even savvy investors are missing out on huge tax-saving opportunities.

Let’s change that. Below are seven deductions investors often miss, and how working with the right tax advisor in Austin can help you keep more of what you earn.

1. Your Home Office: Not Just a Desk But A Legit Deduction

If you manage your rental properties from home, you’re likely eligible for the home office deduction. A powerful write-off that reduces your taxable income.

You can deduct:

• A percentage of your mortgage interest or rent
  
  
• Utilities (like internet, water, electricity)
  
  
• Office furniture, repairs, and supplies
  
  

But there’s a catch:

The space must be used exclusively and regularly for rental activities. So no, your kitchen counter doesn’t count.

If you’re unsure how to calculate the deduction, a certified public accountant near you or a CPA in Austin, Texas can help you measure the square footage and apply the correct percentage to your home expenses.

2. Depreciation: The Silent Hero of Real Estate Investing

Let’s talk about depreciation – a deduction that can wipe out your rental income without touching your bank account.

What is depreciation?

It’s a non-cash expense that lets you write off part of your property’s value over 27.5 years for residential real estate.

Example:

Buy a $500,000 rental
 Allocate $400,000 to the building
 Divide that by 27.5 years
 That’s $14,545/year in deductions, with zero cash outlay

A certified CPA near you can also help you accelerate this through cost segregation which reclassifies certain components (like flooring, appliances, or fencing) into 5-, 7-, or 15-year assets for faster write-offs.

3. Travel, Mileage, and Property Visits: Start Tracking Everything

Every time you drive to your rental, meet with a contractor, show the property to a potential tenant, or attend an inspection—guess what? That’s not just time well spent, it’s a deductible business expense.

Here’s what you can deduct in 2025:

• Mileage at the standard IRS rate: 67 cents per mile (unchanged from 2024 as of current guidance)
  
  
• Airfare and hotel stays for managing out-of-state properties
  
  
• Meals while traveling for rental-related purposes (50% deductible under IRS rules)
  
  

Whether it’s a quick site check or a cross-country flight to meet with your property manager, it all adds up.

The key is documentation. Use a mileage tracking app or keep a logbook. Save receipts for flights, hotels, and meals. And be consistent.

4. Professional Services: Your Experts Are Deductible Too

Paying for help shouldn’t feel like a loss, especially when it saves you taxes.

Deductible services include:

• Your Austin accounting firm or CPA firm in Austin, Texas
  
  
• Attorneys who draft leases, handle disputes, or support closings
  
  
• Property managers
  
  
• Bookkeepers and consultants
  
  

Hiring professionals doesn’t just save you time. With the right strategy, it lowers your taxable income too.

5. Utilities and Maintenance: The Everyday Stuff That Adds Up

If you’re paying for tenant utilities or footing the bill for ongoing maintenance, don’t forget to deduct it.

Deductible expenses include:

• Electricity, gas, water, internet (if you’re covering it)
  
  
• Trash collection and pest control
  
  
• HVAC repairs, plumbing fixes, landscaping
  
  

Repairs vs. Improvements:

Repairs (fixing a water heater) = immediate deduction
 Improvements (replacing the whole HVAC) = depreciated over time

A skilled taxation accountant or chartered public accountant will help you distinguish between the two and file accordingly.

6. Tenant Acquisition and Marketing: Finding Good Tenants Costs Money

Yes, you can deduct your marketing efforts from listing photos to Zillow ads.

You can write off:

• Paid listings (like Apartments.com or Rent.com)
  
  
• Social media advertising
  
  
• Photography and videography
  
  
• Printed flyers, signage, and direct mail
  
  

At Insogna CPA, we help clients capture every marketing dollar and file it under the right category using our services accounting system, so you’re not leaving money on the table.

7. Insurance and Umbrella Policies: Protect Yourself and Save

Insurance isn’t just essential, it’s deductible.

What’s included:

• Standard landlord insurance
  
  
• Flood, earthquake, or fire coverage
  
  
• Liability policies
  
  
• Umbrella policies for extra protection
  
  

Many landlords forget umbrella coverage is also deductible but your tax professional near you won’t. We make sure every policy is categorized properly.

Bonus Strategy: Don’t Let Passive Losses Sit Idle

Here’s where high-income investors miss out: passive losses.

Under IRS rules:

• Rental income is passive, so it can only be offset by passive losses
  
  
• If your income is under $100,000–150,000, you might deduct up to $25,000
  
  
• Over $150,000? That deduction phases out unless…
  
  

You qualify for:

Real Estate Professional Status (REPS)

Work 750+ hours/year in real estate, and more than 50% of your total work time, and you can:

• Deduct losses against all income from W-2s, business income, you name it
  
  

Short-Term Rental Loophole

Own an Airbnb? If the average stay is under 7 days and you materially participate, the IRS might consider it non-passive, letting you deduct losses against active income.

A real estate-savvy CPA in Austin, Texas can help you qualify and comply, so you’re not leaving those “trapped” losses unused.

Planning to Sell? Watch for Depreciation Recapture

When you sell:

• The IRS “recaptures” the depreciation you claimed
  
  
• You pay tax, usually 25% on the recaptured amount
  
  

Want to avoid the sting?

Use a 1031 exchange.

This lets you roll your gain into a new property, deferring capital gains and depreciation recapture tax.

Our team at Insogna CPA, one of the most experienced CPA firms in Austin, Texas, handles:

• Exchange timelines
  
  
• Qualified intermediary coordination
  
  
• IRS compliance and multi-state filings
  
  

If you’re thinking about selling, talk to a tax advisor near you before listing the property.

What About Compliance? Because Great Deductions Need Great Records

Even the best deductions won’t help if your records are a mess.

We help investors across Texas and beyond with:

• W9 tax form collection
  
  
• 1099 NEC filings for vendors
  
  
• FBAR filing if your rental income flows through foreign bank accounts
  
  
• Schedule E vs. Schedule C classifications
  
  
• Quarterly estimates and audit protection
  
  

Working with a CPA firm in Austin, Texas that understands investor filings will save you from IRS headaches down the road.

Filing Checklist for Real Estate Investors

Before you hit “submit,” make sure you’ve:

 ✔ Tracked and categorized all expenses
 ✔ Filed the correct tax forms (W9, 1099 NEC, FBAR)
 ✔ Created depreciation schedules or ordered a cost segregation study
 ✔ Separated building and land for depreciation
 ✔ Determined if REPS or STR rules apply
 ✔ Planned for depreciation recapture or a 1031 exchange
 ✔ Worked with a certified CPA or tax preparer near you who specializes in real estate

Why Investors Choose Insogna CPA

You’re not just filing a return. You’re building a portfolio. And you need more than a one-size-fits-all accountant.

At Insogna CPA, your go-to Austin, TX accountant, we deliver:

• Deep expertise in real estate tax planning
  
  
• A team of certified CPAs, chartered professional accountants, and enrolled agents
  
  
• Full-service tax planning, including cost segregation and 1031 exchange strategy
  
  
• Year-round support from one of the most trusted CPA firms in Austin
  
  
• A client-first approach that helps you grow your portfolio tax-efficiently
  
  

Ready to Start Keeping More of What You Earn?

Taxes shouldn’t be a mystery or a missed opportunity. With the right guidance, they become part of your wealth-building engine.

Schedule your free consultation today with Insogna CPA, your trusted Austin, Texas CPA firm, and let’s turn your next tax return into a strategic step forward.

Because in real estate, it’s not just about what you make. It’s about what you keep...

Summary of What This Blog Covers:

• Explains How Rental Income Is Taxed and What Investors Must Report
  The blog outlines how rental income is classified by the IRS, what counts as taxable income (including advance rent and kept deposits), and how real estate investors can reduce their tax liability through strategic expense deductions.
• Covers Key Real Estate Tax Deductions and Depreciation Strategies
  From mortgage interest and property taxes to depreciation and property management fees, this guide helps landlords identify commonly missed deductions and optimize their tax savings with the help of an experienced Austin, Texas CPA.
• Breaks Down Passive Loss Limitations and How to Legally Work Around Them
  The post explains the IRS’s passive activity rules and introduces two powerful strategies (Real Estate Professional Status (REPS) and the short-term rental loophole) that allow high-income earners to deduct real estate losses against other income.
• Highlights Long-Term Tax Planning Tools Like 1031 Exchanges and Compliance Must-Haves
  The blog walks through what happens at sale including depreciation recapture and how a properly executed 1031 exchange can defer taxes, while also emphasizing the importance of compliance tasks like issuing W9s, 1099 NECs, and FBAR filings.

Filing Taxes on Your Rental Property? Let’s Make Sure You’re Doing It Right

Owning rental property is a powerful way to build wealth. Cash flow, long-term appreciation, leverage, you know the drill. But when tax season rolls around, many investors start asking, “Wait… am I doing this right?”

Spoiler alert: If your current tax planning consists of dumping a stack of receipts on your accountant’s desk and crossing your fingers, it’s time for an upgrade.

At Insogna CPA, a real estate-focused Austin, Texas CPA firm, we work with property owners who want to do more than file on time. They want to build a tax strategy that protects their profits.

Whether you’re new to rental income or scaling a multi-state portfolio, here’s what you need to know before filing your next return.

How Rental Income Is Taxed and How to Keep More of It

Let’s start at the beginning.

Yes, rental income is taxable, but the rules are very different from how your W-2 or business income is taxed.

What counts as rental income?

• Rent payments from tenants
• Advance rent (even if it’s for future months)
• Lease cancellation fees
• Kept security deposits (if applied toward unpaid rent or repairs)

What’s not income (yet)?

• Security deposits that are refundable
• Expense reimbursements (as long as they’re directly related)

Here’s the good news:

• Rental income is considered passive, so it’s not subject to self-employment tax

   

• You’re only taxed on net income—meaning, after deductions
• You report everything on Schedule E, which flows through to your personal return

Smart planning from a CPA in Austin, Texas means structuring things correctly so you’re only taxed on the income you keep, not the gross rent you collect.

The Real Estate Investor’s Deduction Playbook

This is where strategy really starts to pay off.

Real estate investors have access to one of the longest deduction lists in the tax code and every one of them directly reduces taxable income.

Common deductions include:

• Mortgage interest

   

• Property taxes

   

• Depreciation (a major one—more on that soon)
• Repairs and maintenance

   

• Insurance premiums

   

• Utilities (if paid by you)
• HOA or condo fees

   

• Property management costs

   

• Advertising and marketing expenses

   

• Travel and mileage related to managing the property
• Legal and professional fees, including your Austin tax accountant

   

Deductions investors often miss:

• Cell phone or internet costs (if used for managing rentals)
• Subscriptions to real estate publications or tools
• Home office expenses if you manage from home
• Bank fees and interest on property-related loans

At Insogna CPA, we provide real estate-specific services accounting so you can track every deduction with confidence and ensure you’re claiming every dollar you deserve.

Depreciation: Your Secret Weapon for Long-Term Tax Savings

If you own rental property and you’re not using depreciation, you’re giving away free money to the IRS.

What is depreciation?

It’s a non-cash deduction that allows you to write off the cost of your rental building (not the land) over 27.5 years for residential properties.

Example:

Buy a rental for $500,000
 Allocate $400,000 to the building
 Divide that by 27.5 years
 That’s over $14,500/year in deductions, every year, no out-of-pocket cost required

This deduction alone can wipe out your taxable rental income if used properly.

Even better? You can accelerate this deduction with a cost segregation study, which we coordinate for clients at Insogna CPA, one of the most experienced CPA firms in Austin, Texas for real estate.

Passive Activity Loss Rules: What They Are and How to Work Around Them

The IRS classifies rental income as passive, and this classification limits how much you can deduct.

Key rules:

• Passive losses can only offset passive income

   

• If your income is under $100,000, you may be able to deduct up to $25,000 in passive losses

   

• Between $100,000 and $150,000, that deduction phases out
• Above $150,000? Passive losses are carried forward unless you qualify for an exception

That means many high-income earners end up sitting on “paper losses” they can’t use. Unless…

1. Real Estate Professional Status (REPS)

If you or your spouse:

• Spend 750+ hours/year on real estate
• And more than 50% of your working hours are in real estate…

…you may qualify as a real estate professional, and your rental losses can offset active income.

We help clients qualify and document this status with help from our team of certified public accountants, taxation accountants, and enrolled agents. Because when done right, REPS can unlock massive tax savings.

2. Short-Term Rental Loophole

Even if you don’t qualify for REPS, you can still use losses to offset other income if you own a short-term rental.

Requirements:

• The average guest stay is under 7 days

   

• You materially participate (manage or oversee operations)

This turns your short-term rental into non-passive income, allowing you to deduct depreciation and other losses against your day-job income.

STRs are one of the most powerful tools in the code when used correctly. That’s where your tax advisor near you comes in.

What Happens When You Sell Your Property?

Depreciation Recapture

All those depreciation deductions? The IRS remembers them when you sell.

You may have to pay depreciation recapture tax, typically at 25% of the amount you’ve depreciated.

Solution? A 1031 Exchange

A 1031 exchange lets you sell a property and reinvest in a new one, deferring taxes on both capital gains and depreciation recapture.

We’ve helped clients across multiple states successfully execute exchanges that saved tens of thousands in taxes.

If you’re selling, talk to a certified CPA near you before you list. A smart plan today can save you a fortune tomorrow.

Don’t Skip the Compliance Details

Great tax planning means nothing if you forget to file the right forms.

At Insogna CPA, we help investors stay audit-ready and stress-free with:

• Schedule E vs. Schedule C reporting
• W9 tax forms for contractors
• 1099 NEC filings for vendors paid over $600
• FBAR filing if rental income touches foreign accounts
• Multi-state filings for out-of-state investments

Our Austin accounting service includes quarterly reviews, estimated payment tracking, and audit protection because compliance isn’t optional, and neither is peace of mind.

Real Estate Tax Planning Checklist

Use this before you file:

✔ Classify property type and structure (LLC, personal, S-corp)
 ✔ Separate land and building for depreciation
 ✔ Claim every possible deduction
 ✔ Create and manage a depreciation schedule
 ✔ Explore cost segregation for properties over $500,000
 ✔ Determine if REPS or STR rules apply
 ✔ Use 1031 exchange to defer gains if selling
 ✔ File required forms: W9, 1099 NEC, FBAR
 ✔ Work with a licensed CPA who specializes in real estate

Why Investors Choose Insogna CPA

We’re more than just a tax preparer near you. We’re a full-service tax and accounting partner who helps you scale smarter.

What we bring:

• Deep experience in real estate tax law

   

• Full team of certified CPAs, chartered professional accountants, and certified general accountants

   

• Real-world knowledge of Austin accounting and national investment structures
• Personalized, year-round support, not just during tax season
• Strategic planning, including 1031 exchange support, entity structuring, and cost segregation analysis

   

If you’re managing even a single rental, you deserve a team that understands the tax landscape inside and out.

Book Your Strategy Session Today

Ready to stop guessing and start saving?

At Insogna CPA, your go-to Austin, TX accountant, we help real estate investors build tax strategies that grow with their portfolios.

Whether you need tax help for a new rental, a better bookkeeping system, or advanced real estate tax planning, we’ve got you covered.

Schedule your consultation today and let’s build a filing plan that’s not just IRS-ready but wealth-ready...`

Summary of Blog Covers:

• Explains the Fundamentals of Rental Property Depreciation and Why It’s Essential
  This blog demystifies depreciation, showing how it lets rental property owners deduct a portion of a property’s value annually. Lowering taxable income and increasing cash flow while highlighting why so many landlords miss this powerful, non-cash tax benefit.
  
  
• Introduces Cost Segregation as a Strategy to Accelerate Deductions
  It breaks down how a cost segregation study helps investors reclassify property components into shorter depreciation schedules, resulting in faster, larger deductions, and why working with a specialized CPA in Austin, Texas is critical for compliance and optimization.
  
  
• Outlines Tax Planning Strategies for High-Income Earners Using REPS and STR Rules
  The blog walks through advanced strategies like Real Estate Professional Status and the short-term rental loophole, which allow depreciation and rental losses to offset W-2 or business income, providing significant savings for high earners with the right structure.
  
  
• Covers Long-Term Depreciation Planning Including 1031 Exchanges and Compliance Essentials
  It highlights the importance of planning for depreciation recapture, using 1031 exchanges to defer taxes, and staying IRS-compliant through proper documentation, filings, and the support of experienced taxation accountants and certified public accountants.

You Own Rental Property So Why Aren’t You Using This Tax Hack?

If you own rental property, you’re probably familiar with terms like passive income, cash-on-cash return, and maybe even 1031 exchange. But how familiar are you with depreciation?

Most real estate investors don’t think much about it until tax season hits and their CPA mentions it in passing. If you saw “depreciation” on your tax return and brushed it off as an IRS formality, you’re missing out on one of the most powerful tax-saving strategies available.

At Insogna CPA, a top-tier Austin, Texas CPA firm, we help real estate investors like you turn depreciation from a passive line item into an active wealth-building strategy.

Let’s dive deep into how it works, how to optimize it, and how to ensure your accountant is helping you take full advantage of what depreciation can do.

What Is Depreciation and Why It Matters

In simple terms, depreciation allows you to deduct part of your property’s cost each year to reflect wear and tear even if that property is appreciating in market value.

Why it matters:

• It’s a non-cash deduction, which means you’re not spending money to get the deduction.
  
  
• It directly lowers your taxable income, reducing how much you owe the IRS.
  
  
• It’s available every year for as long as you own the property (up to 27.5 years for residential rentals).
  
  

Example:

Let’s say you buy a property for $500,000. You allocate $400,000 to the building (the rest is land, which doesn’t depreciate). Divide that over 27.5 years, and you’re getting about $14,545/year in tax deductions before you even count expenses.

That’s depreciation in action. And if your Austin tax accountant isn’t maximizing it for you, it’s time to upgrade your strategy.

How Depreciation Works: The Basics

The IRS gives rental property owners the ability to depreciate residential real estate over 27.5 years. That means, every year, you deduct a portion of the property’s value from your taxable income.

Depreciation starts the day your property is placed in service (when it’s ready to rent) and continues every year after.

Here’s how the IRS classifies different property components:

• Residential rental building: 5 years
  
  
• Commercial property: 39 years
  
  
• Appliances, equipment, and furniture: 5 years
  
  
• Carpets, flooring, cabinets: 7–10 years
  
  
• Landscaping and site improvements: 15 years
  
  

But most investors only depreciate their property as one lump asset over 27.5 years. That’s playing it safe and slow.

Let’s show you how to go faster.

Enter: Cost Segregation (The Fast Lane to Tax Savings)

What is cost segregation?

Cost segregation is a tax planning tool that allows you to break a property into multiple asset classes, each with its own depreciation timeline. It’s fully IRS-approved, and it’s how smart investors speed up deductions.

Rather than waiting decades to write off everything, you:

• Classify lighting, cabinets, and flooring as 5- or 7-year property
  
  
• Identify site improvements, like driveways or fencing, as 15-year property
  
  
• Accelerate bonus depreciation on short-life assets, if eligible
  
  

The result?

More deductions now when you’re likely reinvesting or scaling and less taxable income today.

Cost segregation is ideal for properties over $500,000 but is increasingly common for smaller portfolios, too. At Insogna CPA, a respected CPA firm in Austin, Texas, we coordinate engineering-backed studies that follow IRS guidelines to the letter.

This isn’t DIY territory. You need a licensed CPA near you who specializes in real estate and knows how to apply the results strategically.

Depreciation and Passive Losses: Know the Rules

Here’s where high earners often run into confusion.

The IRS classifies most rental income as passive, which means:

• Depreciation and other losses can only offset passive income
  
  
• If your income exceeds $150,000, your ability to deduct those losses is limited
  
  
• Unused losses are carried forward into future years
  
  

Sound frustrating? It doesn’t have to be.

We help our clients unlock those “trapped” deductions using two powerful strategies:

1. Real Estate Professional Status (REPS)

REPS is a designation that allows you to treat rental losses as non-passive—meaning you can use them to offset active income like W-2 wages or business profits.

To qualify:

• You (or your spouse) must work 750+ hours in real estate activities per year
  
  
• More than 50% of your working hours must be in real estate
  
  

We work with clients to document hours, track activities, and qualify because this status can unlock five or six figures in annual deductions.

2. Short-Term Rental Loophole

Don’t qualify for REPS? If you rent properties on Airbnb or VRBO, you might not need to.

If:

• The average guest stay is less than 7 days
  
  
• And you materially participate
  
  

…your property may be treated as non-passive, even if you’re not a full-time investor. That means depreciation and other deductions can reduce your regular income.

This is a goldmine for high earners but only if executed correctly with help from a tax advisor near you who understands IRS guidelines on STRs.

Depreciation and the 1031 Exchange

What happens when you sell a depreciated rental?

The IRS comes calling with depreciation recapture, a tax on the amount of depreciation you’ve claimed usually at 25%.

But there’s good news.

Enter: the 1031 exchange.

This IRS-sanctioned strategy lets you defer both capital gains and depreciation recapture taxes by reinvesting proceeds into another like-kind property.

At Insogna CPA, we:

• Help clients identify eligible exchanges
  
  
• Coordinate with qualified intermediaries
  
  
• File correct paperwork
  
  
• Time it to maximize tax deferral
  
  

Used properly, a 1031 exchange keeps your money working in real estate, not stuck in taxes.

Compliance Still Matters (And We’ll Help You Stay Ahead)

Even with powerful deductions like depreciation, the IRS expects clean records and proper filings.

At Insogna CPA, we help you stay compliant by handling:

• Schedule E vs. Schedule C reporting
  
  
• W9 tax forms for contractors
  
  
• 1099 NEC forms for service providers paid over $600
  
  
• FBAR filing if rental income touches foreign bank accounts
  
  
• Multi-state filings if your rentals cross state lines
  
  

If you’re searching “tax preparation services near me” and you’re tired of basic box-checking, work with a team of certified CPAs, chartered public accountants, and taxation accountants who understand your business.

Rental Property Depreciation Checklist

Here’s what we help you implement:

✔ Allocate property value between land and building
 ✔ Create and track depreciation schedules
 ✔ Conduct cost segregation studies for faster deductions
 ✔ Use REPS or STR strategies to unlock passive losses
 ✔ Plan 1031 exchanges to defer depreciation recapture
 ✔ Stay audit-proof with receipts, records, and compliance
 ✔ File all necessary local, state, and federal forms

We don’t just file, we plan.

Why Investors Trust Insogna CPA

We’re not just your average “CPA near you” or tax preparer you call once a year. We’re the team behind some of the smartest tax strategies in Texas real estate.

What makes us different:

• Deep expertise in real estate tax law and cost segregation
  
  
• Personalized, year-round support from a CPA in Austin, Texas
  
  
• Clear, proactive guidance from a certified professional accountant
  
  
• Scalable strategy for portfolios of 1 to 100+ units
  
  
• A client-first approach that puts your wealth-building goals first
  
  

Whether you’re a hands-on landlord, a short-term rental host, or a passive investor, we’ll make depreciation work for you.

Ready to Start Writing Off More and Keeping More?

Depreciation isn’t just a line on your return, it’s a powerful tool to grow your real estate wealth faster and smarter.

Schedule your consultation with Insogna CPA, your expert Austin tax accountant, and let’s put your tax dollars to work.

We’ll help you build a real estate tax strategy that’s not only legal but optimal.

Because owning rental property isn’t just about collecting rent. It’s about keeping what you earn...