Many landlords wonder if their tax deductions change when their rental property is held in an LLC rather than individually owned. The good news is that rental property tax deductions generally remain available when operating through an LLC.

Whether you’ve recently formed an LLC for your existing rentals or you’re filing taxes for an LLC-owned property for the first time, understanding these deductions can save you thousands of dollars each year.

Let’s examine which tax deductions apply to LLC rental properties, any differences from individual ownership, and how to track and claim these deductions to save money on taxes.

We’ll cover pass-through taxation benefits, specific deductible expenses like LLC formation costs, and practical ways to reduce your tax bill through your LLC.

What makes LLC taxation different

An LLC can offer some protection for your personal assets from business liabilities, but it’s not a tax category recognized by the IRS. If you’re the only owner, the IRS treats your LLC as a “disregarded entity” – meaning that while your LLC doesn’t pay taxes, you still do (sometimes). For LLCs with multiple owners, the IRS treats them as partnerships by default.

This matters because your LLC can give you some legal protection without changing how your rental income is taxed. What changes is how you file taxes (sometimes) and which forms you use to claim deductions.

Pass-through taxation explained

The main tax implication of putting your rental property into an LLC is that you will typically enjoy pass-through taxation:

• Your LLC pays no federal income tax
• All profits and losses flow directly to your personal tax return
• You report rental income and expenses on Schedule E of your Form 1040
• You will likely still incur some state and/or local taxes and/or fees related to your LLC

This pass-through structure prevents the double taxation that corporations face, where profits are taxed at both the business and personal levels. For rental property owners, this means you maintain the tax efficiency of individual ownership while gaining whatever liability protection may come with creating an LLC.

Let’s say you own a duplex in your LLC that generates $24,000 in annual rent and has $15,000 in expenses. Your LLC doesn’t pay tax on the $9,000 profit – instead, you report this income on your personal tax return and pay tax at your individual rate.

Tax filing requirements

The filing requirements for LLC-owned rental properties differ based on the number of members:

Single-member LLCs

• The LLC itself does not file a separate tax return with the IRS
• As a “disregarded entity,” all income and expenses flow directly to your personal tax return
• File Schedule E with your personal Form 1040 to report rental income and expenses
• Include your rental income, expenses, and deductions just as you would if you owned the property individually
• May need to file Form 8832 if you elect to be taxed as a corporation

Multi-member LLCs

• The LLC must file Form 1065 (U.S. Return of Partnership Income) with the IRS
• This is an informational return only—the LLC itself doesn’t pay federal income tax
• The LLC issues Schedule K-1 forms to each member showing their share of income/losses
• Each member reports their portion on their personal tax returns via Schedule E
• Additional state filing requirements may apply

Some states also impose annual fees or franchise taxes on LLCs regardless of profitability. These fees are typically deductible as a business expense, which we’ll cover later in this post.

Standard rental property deductions for LLCs

One of the advantages of holding rental property in an LLC is that you can still claim all the same standard deductions available to individual property owners. The tax code treats the rental activity the same way whether it’s held in an LLC or as a sole proprietorship. The difference is primarily in the legal structure, not the tax treatment of ordinary rental expenses.

Here are the standard rental property deductions you can claim with your LLC-owned properties:

Mortgage interest

You can deduct 100% of the interest you pay on your rental property mortgage. For most landlords, this is their biggest tax break. Your lender will send you Form 1098 showing how much interest you paid. Remember: you can only deduct the interest portion, not your principal payments.

Property taxes

You can deduct all property taxes paid on your rental. These taxes vary based on your property’s location and value, but typically run thousands of dollars annually. This deduction helps offset one of your largest recurring expenses.

Landlord insurance premiums

This includes coverage for property damage, liability insurance, and any specialized policies like flood or earthquake insurance specific to your rental property.

Maintenance and repairs

Routine maintenance and necessary repairs to keep your property in good working order are fully deductible in the year you pay for them. This includes costs for plumbing repairs, fixing electrical issues, painting, replacing broken windows, and other general upkeep expenses.

Utilities

If you pay for any utilities for your rental property—such as water, gas, electricity, sewer, or garbage collection—these costs are fully deductible. This usually applies even during vacancy periods when you’re between tenants, assuming the property is still technically “in service.”

Property management fees

Fees paid to property management companies or property managers to oversee your rental are deductible. This includes monthly management fees, leasing fees, and any other charges from your property management company.

Landscaping and yard maintenance

Regular lawn care, tree trimming, snow removal, and other landscaping expenses necessary to maintain the property are deductible. These services help preserve the property’s value and appeal to tenants.

Cleaning and janitorial services

Professional cleaning services between tenants or regular cleaning for common areas in multi-unit properties generally qualifies as a deductible expense. This includes carpet cleaning, window washing, and other cleaning services.

Advertising and marketing

Costs associated with advertising your property for rent—including online listing fees, photography, signage, and other marketing materials—are deductible business expenses directly related to your rental activity.

Pest control

Regular pest control services help keep your rental property habitable. This includes preventative treatments and emergency extermination services when issues arise, such as with bed bugs or mites.

HOA and condo fees

If your rental property is in a community with a homeowners association or is a condominium, the regular dues and assessments are deductible operating expenses.

Rental license fees

Many municipalities require landlords to obtain and renew rental licenses or permits. These fees are deductible as ordinary and necessary business expenses.

Mortgage insurance premiums

If your mortgage includes private mortgage insurance (PMI) or mortgage insurance premiums (MIP) for FHA loans, these amounts are typically deductible for rental properties.

It’s important to note that while these standard deductions work the same way for LLC-owned properties as they do for individually owned properties, proper record-keeping is essential. Maintaining clear separation between your personal and LLC expenses will help protect your liability shield while ensuring you capture all eligible deductions.

Business expense deductions for rental LLCs

• Professional services: Deduct fees paid to attorneys, accountants, tax preparers, and property management consultants.
• Travel expenses: Deduct 70 cents per mile (2025 rate) when you drive to collect rent, handle maintenance, or show vacancies. Also deduct parking fees and travel costs to out-of-state properties.
• Home office expenses: If you use part of your home exclusively for managing your rental business, you can deduct a percentage of your utilities, internet, and other home expenses.
• LLC formation and maintenance costs: Deduct all fees paid to create and maintain your LLC, including state filing fees, annual report fees, and registered agent service costs.
• Education expenses: Deduct costs for real estate investment courses, books, landlord association memberships, and industry conferences that help you better manage your rental business.
• Technology and software: Deduct subscription fees for property management software, accounting programs, online rent collection services, and cloud storage for your lease documents and receipts.
• Office supplies: Deduct everyday items needed to run your rental business, such as paper, pens, postage for mailing notices to tenants, and costs to print leases and other documents.
• Business insurance: Deduct premiums for business liability coverage, errors and omissions insurance, and umbrella policies that protect your rental business. These are separate from your standard landlord insurance.
• Professional networking: Deduct membership dues for real estate investment groups, Chamber of Commerce fees, and costs for business meals when you meet with potential partners, contractors, or fellow investors to discuss your rental business.

Depreciation benefits for LLC rental properties

The IRS allows you to deduct the cost of your property (excluding land) over 27.5 years for residential rental properties. This non-cash expense can significantly reduce your taxable rental income each year.

Depreciation is a powerful tax benefit because it doesn’t require any out-of-pocket expense after your initial property purchase. The IRS recognizes that buildings wear out over time, and allows you to recover this cost through annual deductions.

Here’s how it works in practice:

Let’s say you buy a rental property for $350,000 through your LLC. The county assessment values the land at $50,000 and the building at $300,000. Since you can only depreciate the building: 

$300,000 ÷ 27.5 years = $10,909 yearly tax deduction

If your property generates $24,000 in annual rental income and you have $8,000 in actual expenses (mortgage interest, property taxes, insurance, etc.), your rough high-level taxable income calculation would look like this:

• Rental income: $24,000
• Actual cash expenses: $8,000
• Depreciation expense: $10,909
• Taxable rental income: $5,091

Without the depreciation deduction, your taxable rental income would be $16,000 ($24,000 – $8,000). Depreciation reduces your tax liability without affecting your actual cash flow, creating a significant tax benefit for LLC rental property owners.

Depreciation of capital improvements

Capital improvements to your rental property—such as a new roof, addition, major renovation, or HVAC system replacement—are usually not immediately deductible as expenses. Instead, these costs are generally depreciated over time:

• Residential rental property improvements are typically depreciated over 27.5 years
• Land improvements (like driveways or landscaping) are depreciated over 15 years
• Each improvement has its own depreciation schedule starting from the date it’s placed in service

This creates additional depreciation deductions that further shelter your rental income from taxes.

Furnishings and equipment depreciation

One big advantage of owning rental property is the ability to separately track and depreciate personal property items at accelerated rates:

• Appliances, carpeting, and furniture can be depreciated over 5 years
• Office equipment and computers used for property management can be depreciated over 5 years
• Window treatments and some fixtures can be depreciated over 7 years

These shorter depreciation periods allow you to recover the cost of these items more quickly than the building itself, providing front-loaded tax benefits.

Remember that depreciation is “recaptured” when you sell the property, potentially creating taxable income. However, strategies like 1031 exchanges can help defer this tax liability.

Tracking expenses for maximum LLC tax benefits

To maximize tax benefits and enhance the protective effects of your LLC’s liability shield, it’s best to keep your business and personal finances completely separate. Pay all rental expenses from your LLC bank account, not your personal account. This creates a clear record for tax deductions and strengthens your liability protection.

Using dedicated landlord banking solutions like Stessa Cash Management simplifies this process by providing property-specific accounts that automatically track and categorize expenses. With competitive interest rates on cash held in your accounts and automatic data syncing, you’ll spend less time organizing receipts and more time building your portfolio.

Stessa’s accounting tools further streamline tax preparation by generating reports that help you capture more eligible deductions. From tracking depreciation schedules to documenting business expenses, these purpose-built tools help rental property LLCs maximize tax savings with minimal effort.

Over 300,000+ rental property owners rely on Stessa for:

• Automated income and expense tracking: Organize and categorize transactions automatically from connected bank, lender, credit card, and property management accounts with no extra fee or add-on required. 
• Financial reporting: Generate income statements, net cash flow reports, balance sheets (with the paid Stessa Pro plan), and more, all within the platform.
• Real-time performance metrics: Get 24/7 visibility into your portfolio’s performance with no third-party software required.
• Online rent collection: Automate your rent collection process, including payment reminders and late fees, reducing the likelihood of missed or late payments.
• Advertise vacancies: Publish a vacancy for rent and syndicate your listing out to a variety of websites for maximum exposure to high quality tenants.
• Rental applications: Manage tenant applications efficiently and effectively by streamlining the process of publishing vacancies and collecting and reviewing applications.
• Tenant screening: Use a proprietary approach with RentPrep for comprehensive tenant checks, including a full credit report, background check, and more. Landlords can also add screening for income verification or of judgment and liens, increasing the odds of selecting reliable tenants.
• Unlimited properties: Add as many single-family homes, short-term vacation rentals, or multifamily units as you like.
• Tax center: Tax time is a cinch thanks to the Stessa Tax Package feature. It helps aggregate your transactions and sends you personalized tax reports via email with digital copies of all of your receipts packaged into a single ZIP file.
• eSigning (partnered with DocuSign): With the Stessa Pro plan, you can upload up to seven documents monthly, mark them for electronic signatures, and send them to tenants, vendors, and partners. 
• Smart receipt scanning: Add expense receipts to your transactions ledger quickly and accurately via mobile scans and email forwarding, reducing the risk of losing or misplacing vital receipts.

Set up a free Stessa account in minutes and take control of your LLC’s finances today.