Owning rental property in Texas is a smart investment, but are you making the most of your tax benefits? Many landlords leave money on the table simply because they aren’t aware of all the deductions available to them.
At Flat Fee Landlord, we’re committed to making property management easy for Texas homeowners, and this includes feeling prepared for tax season.
When you partner with Flat Fee Landlord, we start the tax preparation process early. Before the holidays, we audit every landlord’s account to ensure their 1099 information is up to date, and if we catch any missing information or errors, we correct them before we send out our partners’ 1099s.
Once you get your 1099 and you’re ready to file, here’s your guide to the top landlord tax deductions and how to maximize your return.*
The Most Valuable Landlord Tax Deductions in Texas
Below are the key deductions landlords should know about — particularly relevant for Texas property owners — along with how to use them strategically.
1. Mortgage Interest
One of the largest deductions for most landlords is the interest paid on the rental property’s mortgage. As an operating expense, mortgage interest reduces your taxable rental income.
With property values rising in many Texas markets, mortgage balances remain high, which makes this deduction more significant.
Make sure your loan is properly documented and that the interest appears on the Form 1098 (or equivalent) for the year.
2. Property Taxes
While Texas doesn’t have a state income tax, property taxes can be substantial. The good news is you can deduct the full amount of property taxes paid on your rental property. To do this, you must keep the tax bills and proof of payment for each property. Deducting them reduces your taxable rental income dollar-for-dollar.
An extra perk for homeowners who partner with us: We remind our homeowners that they can dispute their property’s appraisal, which determines their property taxes for that year, since it’s a percentage of the total appraised value.
As the Texas Comptroller website states, “One of your most important rights as a taxpayer is your right to protest to the appraisal review board (ARB). You may protest if you disagree with the appraisal district's value or any of the appraisal district's actions concerning your property.”
3. Repairs and Maintenance
The IRS reports that expenses for repairs (like replacing a broken window or carpet) are generally fully deductible in the year they’re incurred. Routine maintenance, such as lawn care, pest control, and HVAC servicing, also qualifies.
There is an important note to distinguish between repairs and improvements. Improvements add value or extend life and are capitalized, whereas repairs and maintenance are expensed immediately.
Given the climate in much of Texas (heat, pests, and storms), these maintenance costs, especially for your HVAC systems, can add up. Deducting them properly helps control taxable income and your expenses.
4. Depreciation
One of the most powerful deductions landlords often under-utilize. You can depreciate the value of your rental property (excluding land) over 27.5 years for residential property under the general depreciation system (GDS).
For example, if the building portion of your property is $200,000 (this is with the land excluded), dividing by 27.5 yields about $7,273/ year in depreciation.
This strategy matters because it allows you to deduct a portion of the cost of the property each year, reducing taxable rental income even when the property is appreciating.
If you go this route, though, keep in mind the depreciation recapture when you sell, which means the IRS requires you to “recapture” the depreciation deductions and tax them up to a 25% rate. This is applied when you sell, so that is something you can speak to your real estate strategy team or us about to ensure that’s the right route for your goals.
5. Professional Services
Fees paid to property management companies, accountants, attorneys, and other professionals are deductible. With Flat Fee Landlord, your fees, including your monthly management fees, renewal fees, and any other miscellaneous fees, are fully deductible. Our detailed monthly statements make it easy to track these expenses.
When tax season comes, ensure you collect invoices and categorize these fees properly (tax preparation, legal, or property management) so your deductible professional fees are clearly documented.
6. Insurance Premiums
Premiums for landlord insurance, liability coverage, and even flood insurance (in flood-prone parts of Texas) can be deducted from your rental income.
Tip: Save all policy documents and paid receipts. If you carry “landlord insurance” (not just homeowner’s insurance) make sure the insurance contract is designated for the rental property.
7. Utilities
If you pay for utilities (water, gas, electricity, trash) on behalf of your tenants, those costs are deductible. For example, if you cover HVAC servicing or utilities in an older rental unit, treat those costs as operating expenses and deduct them accordingly.
At Flat Fee Landlord, we require tenants to switch the utilities over to their name since it’s better for record-keeping and is easier on our landlords for chasing their tenants down to pay back utility charges already applied.
8. Travel and Mileage
This is less likely as a Flat Fee Landlord member, but if you travel to your rental property for inspections, repairs, or management, you can deduct mileage or travel expenses. Detailed records are crucial, so use a mileage log or app, note the date, purpose, mileage, and associated property. If you travel between multiple properties, ensure you allocate correctly.
Deducting these expenses is one thing; maximizing your tax savings is another. Here’s how to put it all together.
Keep Meticulous Records
The IRS states that you can deduct “ordinary and necessary” expenses for managing, conserving, and maintaining rental property — but documentation is key. These are the records to be sure you have to provide to the IRS:
Receipts, invoices, and statements for every expense
Proof of payment
Categorized expense summaries
Depreciation schedules
Mileage logs or travel documentation
At Flat Fee Landlord, we provide owners with clear, itemized monthly and year-end statements to make this process easy. Additionally, we process 1099s for our owners to simplify their records, too.
Leverage Professional Help
A qualified Texas tax professional who understands rental real estate law can help you identify deductions you might miss and ensure you comply with IRS rules. Laws and rules change so expert help is necessary. We can connect our owners with trusted tax advisors who know Texas real estate.
Use Technology to Stay Organized
Our owner portal gives you 24/7 access to your financials, so you can download reports and statements anytime, which is perfect for tax season or a quick check-in mid-year.
Don’t Overlook Depreciation
As noted, depreciation is often misunderstood or underutilized. Make sure you’re claiming the full allowable amount each year. Even if your property is appreciating in market value, depreciation allows a deduction based on your cost basis (excluding land). But remember, when you sell, depreciation recapture must be factored in.
Tax season doesn’t have to be stressful. With the right knowledge and the right partner, you can maximize your deductions and keep more of your hard-earned rental income. Flat Fee Landlord is here to help property owners succeed by providing homeowners with:
Detailed Monthly & Year-End Statements: Every expense, fee, and payment is tracked and categorized for you.
Easy Access to Records: Our online portal allows you to download everything you need when you need it.
Annual 1099 Processing: Every Flat Fee Landlord partner automatically receives their 1099 from us, so completing your tax return is a breeze.
Professional Support: We’re here to answer questions and can connect you with tax experts when requested.
Transparent Fee Structure: Our flat management fee is simple to track and fully deductible.
Ready to make property management and tax time easy? Contact Flat Fee Landlord today and see how we can help you maximize your investment returns.
* This content is for general informational purposes only and does not constitute tax advice. Flat Fee Landlord is not a tax professional. Please consult a qualified tax professional or CPA before filing your tax return or making tax decisions related to your investment property.
