Every January, landlords fall into one of two camps: the ones who spent 20 minutes pulling together their tax documents, and the ones who spent an entire weekend digging through shoeboxes, bank statements, and half-remembered Venmo transactions. The difference isn’t talent — it’s preparation.
Whether you manage 2 units or 20, a solid end-of-year routine will save you money on your tax bill and hours of frustration. Here’s the checklist to work through before you (or your accountant) file.
1. Reconcile Every Dollar of Rental Income
Start with income, because that’s where the IRS starts. Pull together all rent payments received for the calendar year, broken down by property and unit. Include:
- Monthly rent payments
- Late fees collected
- Security deposit amounts you kept (for damages, unpaid rent, etc.)
- Any other tenant charges — pet fees, parking fees, application fees
Cross-reference your records against your bank deposits. If a tenant paid in cash or through a platform like Zelle, make sure that’s reflected somewhere. Gaps between what tenants paid and what hit your bank account are exactly the kind of thing that triggers problems during an audit.
Important: Security deposits you’re still holding (and plan to return) are generally not taxable income. Only the portion you applied to damages or unpaid rent counts. Know the difference.
2. Organize and Categorize All Expenses
This is where most landlords leave money on the table. If you haven’t been tracking expenses consistently, now is the time to go line by line through your bank and credit card statements. Common deductible expense categories include:
- Repairs and maintenance — plumbing fixes, appliance repairs, repainting between tenants
- Property management fees — including software subscriptions
- Insurance premiums — landlord policies, umbrella coverage
- Property taxes
- Mortgage interest (not principal — just the interest portion)
- Utilities you pay on behalf of tenants
- Advertising costs — listing fees, signage
- Legal and professional fees — attorney consultations, accountant fees, eviction costs
- Travel expenses — mileage to and from your rental properties for maintenance, inspections, or tenant meetings
- HOA dues
Keep receipts for everything. Digital copies are fine. The IRS doesn’t require a specific format, but they do require that you can substantiate what you claim.
3. Review Depreciation Schedules
Depreciation is one of the most powerful tax benefits available to rental property owners, and it’s the one most commonly misunderstood. Residential rental property is depreciated over 27.5 years. That means each year, you can deduct a portion of the building’s cost basis (not the land — just the structure).
If you purchased a property this year, you need to establish the cost basis and start the depreciation clock. If you’ve owned properties for years, confirm your depreciation schedule is still accurate. Also review whether you made any capital improvements during the year — things like a new roof, HVAC system, or kitchen renovation. These get depreciated separately rather than deducted as a one-time expense.
If you’re unsure about the difference between a repair (deductible now) and an improvement (depreciated over time), talk to your accountant. Getting this wrong in either direction costs you money.
4. Gather Your 1099s and Verify Contractor Payments
If you paid any individual contractor $600 or more during the year, you’re required to issue them a 1099-NEC by January 31. This includes handymen, plumbers, landscapers, or anyone else who isn’t a W-2 employee.
To issue the 1099, you’ll need their full legal name (or business name), address, and taxpayer identification number (TIN or SSN). Ideally, you collected a W-9 form from them before you paid them. If not, reach out now — chasing down a contractor’s tax info in January is nobody’s idea of a good time.
Failing to issue required 1099s can result in IRS penalties, so don’t skip this step.
5. Check for Applicable Deductions You Might Be Missing
A few deductions that smaller landlords frequently overlook:
- Home office deduction — if you manage your properties from a dedicated space in your home
- Mileage — the 2024 standard mileage rate is 67 cents per mile for business use. Even short trips to the hardware store or a property add up fast.
- Startup costs — if you purchased your first rental this year, certain acquisition-related expenses may be deductible
- Qualified Business Income (QBI) deduction — under Section 199A, you may be able to deduct up to 20% of your net rental income. Eligibility depends on your total taxable income and filing status. This one alone can be worth thousands of dollars.
6. Set Yourself Up for Next Year
The best thing you can do for next year’s taxes is to stop relying on memory and spreadsheets held together with hope. Adopt a system — any system — that records income and expenses as they happen rather than reconstructing them months later.
At minimum, you want:
- A dedicated bank account for each property (or at least for your rental business as a whole)
- A consistent way to log expenses and attach receipts
- Automatic tracking of rent payments received
- A mileage log (apps make this effortless)
The landlords who breeze through tax season aren’t doing anything complicated. They just have a system that captures everything in real time so there’s nothing to reconstruct in January.
Tax prep doesn’t have to be a nightmare. Most of the stress comes from disorganized records, not complicated tax law. If you start tracking income and expenses consistently now, next year’s tax season will feel like a formality. Need a simple way to keep your rental finances organized year-round? Create a free DoorLedgers account and start building the paper trail that makes tax time painless.