Rental property owners can generally deduct the ordinary and necessary costs of renting: mortgage interest, property taxes, insurance, HOA dues, repairs, management fees, utilities you pay, legal and tax-prep fees, and travel to manage the property. You also recover the cost of the building through depreciation over 27.5 years. For 2026, the IRS business standard mileage rate is 72.5 cents per mile, and 100% bonus depreciation is back permanently for qualifying property acquired after January 19, 2025. Here is what Arizona rental owners should know for the 2026 tax year, using IRS sources.

Updated October 2026. This is general information, not tax advice. Confirm your situation with a CPA or enrolled agent.

Common deductible rental expenses

IRS Publication 527 (Residential Rental Property) lists the expenses landlords most often deduct on Schedule E:

• Mortgage interest on the rental
• Property taxes on the rental
• Insurance premiums (a policy paid more than a year ahead is deducted over the years it covers)
• HOA dues
• Repairs and maintenance
• Property management fees
• Utilities you pay as the owner
• Advertising
• Legal and professional fees, including tax preparation for the rental schedule
• Local transportation and travel to collect rent or manage, conserve or maintain the property

Lost rent isn’t deductible. If you use the cash method, rent you never collected was never counted as income, so there is nothing to deduct. Expenses to maintain a vacant rental while you look for a tenant are deductible.

Property taxes go on Schedule E

Property taxes on a rental are a rental expense on Schedule E. They are separate from the state and local tax (SALT) cap on itemized deductions, which Publication 527 lists at $40,000 for 2025 under the 2025 law changes. That cap applies to the taxes on your personal home, not to taxes deducted as a rental expense.

Repairs vs improvements

This distinction drives many landlords’ biggest tax questions.

• Repairs keep the property in working order, such as fixing a leak, patching drywall or replacing a broken faucet. They are generally deductible in the year paid.
• Improvements are betterments, restorations or adaptations, such as a new roof, a remodeled kitchen or new central air. They must be capitalized and depreciated.

Safe harbors that simplify the line

The IRS tangible property regulations offer elections that let you deduct some costs that might otherwise be capitalized:

• De minimis safe harbor: taxpayers without an applicable financial statement can elect to deduct items costing up to $2,500 per invoice or per item.
• Safe harbor for small taxpayers: if your average annual gross receipts are $10 million or less and the building’s unadjusted basis is under $1 million, you can deduct repairs, maintenance and improvements for that building when the year’s total is no more than the lesser of $10,000 or 2% of its unadjusted basis. The election is made each year with a statement attached to your return.
• Routine maintenance safe harbor: covers recurring work you expect to do to keep the property in operating condition.

Depreciation

Publication 527 sets out the core rules:

• Residential rental buildings are depreciated over 27.5 years under the general depreciation system.
• Land is not depreciable, so you must split your cost basis between land and building.
• Depreciation starts when the home is ready and available for rent, even if it sits vacant.
• Appliances, carpeting and furniture used in a residential rental are 5-year property.

2025–2026 change: 100% bonus depreciation is back

In IRS Notice 2026-11 (issued January 14, 2026), Treasury and the IRS issued guidance on the permanent 100% additional first-year depreciation deduction under the One, Big, Beautiful Bill for qualified property acquired after January 19, 2025. The building itself, at 27.5 years, is not typical bonus property. Publication 527 notes that some property used in residential rental activities may qualify, and Publication 946 has the details. Ask your tax preparer whether new appliances, carpet or similar items qualify in your case.

Worked examples

Depreciation on a hypothetical home

Assume a rental bought for $400,000, with $80,000 allocated to land (illustrative figures, not market data):

• Depreciable building basis: $400,000 − $80,000 = $320,000
• Annual depreciation for a full year: $320,000 / 27.5 = about $11,636

The first and last years are prorated under the mid-month convention, so year one will be smaller.

Management fees at $2,400 rent

Management fees are a listed rental expense. At $2,400 rent on Property Plus USA’s plans, a full year of monthly management fees is:

• Basic: $75 x 12 = $900
• Traditional: 8% x $2,400 = $192; $192 x 12 = $2,304
• Property Plus: 10% x $2,400 = $240; $240 x 12 = $2,880

Ask your preparer how to treat one-time charges such as the $500 leasing fee. Our year-end owner statements list every fee and expense paid through your account.

Mileage

If you drive 300 business miles in 2026 for your rental, the standard mileage rate gives 300 x $0.725 = $217.50. IRS Notice 2026-10 set the 2026 rate. It was 70 cents for 2025.

Passive loss limits

Rental real estate is generally a passive activity. According to IRS Publication 925:

• If you actively participate, you can deduct up to $25,000 of rental losses against other income.
• That allowance is reduced by 50% of your modified adjusted gross income above $100,000 and is gone at $150,000 ($50,000 to $75,000 if married filing separately and living apart).
• Disallowed losses carry forward to future years.

Income rules that catch new landlords

• Advance rent is income in the year you receive it, whatever period it covers.
• Security deposits are not income if you plan to return them. Any amount you keep is income in that year, and a deposit applied as final rent is advance rent.
• Personal use. If you rent a dwelling for fewer than 15 days in a year, you don’t report the rent, and the expenses aren’t rental expenses. Renting it 15 days or more with personal use means splitting expenses.

Arizona notes

• Arizona eliminated transaction privilege tax on long-term residential rent effective January 1, 2025 (Arizona Department of Revenue).
• Out-of-state owners with Arizona rental income may need to file Arizona Form 140NR, depending on income.

Keep records your preparer can use

Clean records make every deduction easier to support. Property Plus USA owners get monthly and year-end statements through the Rentvine owner portal, so expenses and fees are in one place at tax time. Learn more on our owner page, compare plans on our pricing page, or call 480-586-3700. We manage single-family rentals across the Valley, including Tempe.

Frequently asked questions