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This article is presented by Baselane.
Tax season is upon investors, and with it, a lot of missed opportunities to reduce your tax burden.
The average real estate investor leaves $8,200+ in deductions on the table every year—don’t be that person. If you know what to look for, you could significantly improve your cash flow by making a few simple changes on your tax return.
For example, did you know that 100% bonus depreciation is back for good? Or that the SALT cap will rise to $40K, which means you could have a lot less personal property and local tax to pay?
These are all low-hanging fruit that could save you a lot in business taxes. You don’t need to be a professional accountant to take advantage of them, but you do need to make sure you have a solid, detailed record of your real estate business incomings and outgoings.
Of course, there’s another important reason for having all your tax-related documents in order: minimizing your chances of being audited by the IRS. While statistically this chance is pretty low (around 0.4%), discrepancies in reported income, especially from platforms like Airbnb and Vrbo; overly large or unusual expenses; and incorrectly filed forms can put you at a much higher risk.
Some errors are very basic and avoidable, like reporting rental income on the Schedule C form when it must be reported on Schedule E. But for investors juggling multiple properties, the potential for errors is greater simply because the complexity inevitably increases when you need to report multiple sources of income and expenses.
With these two goals in mind, here is a checklist of the documents you’ll need to have ready to file your taxes as a real estate investor.
Phase 1: Income Documents
First, you’ll need those all-important 1099 forms that reflect your annual income, including from your real estate investments.
The fundamental thing to remember is that the income you report to the IRS can be greater than the sum total recorded on your 1099s (for example, if you had 1099-K income that was less than the current reporting threshold), but it cannot be smaller than what’s on the forms. If there is a discrepancy, the IRS will bill you for the missing income; if there is a large discrepancy, you may fall under further scrutiny. So, it’s very important to make sure you have all your forms.
1099-NEC/MISC
If you made payments to independent contractors, e.g., property managers or builders, during the past calendar year, those payments will need to be recorded on 1099-NEC forms, one form per each contractor if the total you paid during the year was more than $600 (this amount will go up to $2,000 for payments made in 2026). Don’t believe what you may have heard about only needing to submit these forms to the IRS if you want to qualify for passive income loss; all landlords must file 1099-NEC forms if they paid for nonemployee services.
Apart from the fact that it is a requirement and there are penalties for nonfiling, there is a very good financial incentive for filing all your 1099-NEC forms: Doing so will help qualify your rental activity as a business. And qualifying as a business will mean that you qualify for the so-called “pass-through business deduction,” which allows you to deduct up to 20% of your taxable business income.
1099-K
Do your tenants pay rent by credit card? You’ll receive a 1099-K from the card processor. Perhaps they pay you via PayPal or Venmo? If the total payments exceeded $20,000 and 200 transactions, you’ll receive a form 1099-K.
The threshold was lowered to $5,000 for payment apps in 2024, but it has been restored to $20K in 2025. Some states have their own reporting thresholds, however, so you might still receive a 1099-K if you receive less than the threshold amount. And if you are processing payments via a card payment processor like Visa or Mastercard, they’ll send you the form, regardless of the amount.
Remember that 1099-Ks record your gross income, which isn’t necessarily the same as your taxable income. You will be taxed on your business profits, which is your gross income minus legitimate deductibles like business expenses and, for example, any rent discounts you might have given your tenants.
1099-S
Sold an investment property in 2025? You will receive a Form 1099-S from whomever closed the transaction (your real estate agent or attorney). Receiving a Form 1099-S triggers reporting requirements, namely Form 8949 (Sales and Other Dispositions of Capital Assets) and Schedule D, Capital Gains and Losses.
Although selling your own home that’s your main residence generally excludes you from these reporting requirements (unless you made over $250,000 on the sale of your home), selling a vacation home does not.
Although vacation homes are considered personal property, selling them is treated in the same way as selling an investment property. That means you have to report all capital gains on the sale. Selling an investment property also qualifies you for deducting a loss from such a sale, but you can’t apply this deduction to your own home or a vacation property for your own personal use.
Vacation homes that are rented out are another story. You can deduct a loss from the sale of a vacation home you rented out, in which case you’ll have to report the sale on Form 4797, Sale of Business Property. The owners of short-term vacation rentals need to be scrupulous with their recordkeeping—you’ll need to be able to prove to the IRS what purpose the home was held for.
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K-1s
The K-1 form is a crucial piece of financial documentation every real estate investor needs to file their taxes correctly. This form links all your real estate investment income together and shows the IRS your total income, losses, and deductions from each investment, as well as your share in any partnership or LLC’s equity.
The K-1 is very important for filing taxes, but it’s also a key piece of evidence for you, the investor. It is good business practice to evaluate these forms to assess the current profitability of your business.
Rent rolls/bank statements
A rent roll is a historical record of your rental income, which details the type of property you have, the number of tenants, and the amounts paid in rent each month. It’s not a legal requirement to keep a rent roll, but it’s good practice to do so.
Apart from providing an easily accessible record of your rental income, rent rolls allow you to assess which units are performing well. You’ll also need a rent roll for future investments, as they are used by mortgage lenders to assess your risk.
Again, bank statements are not a legal requirement, but good to have to back up your tax returns if needed.
Phase 2: Expense and Deduction Records
Now comes the good part: As a real estate investor, you qualify for a number of business expenses and deductions, which can make a significant difference to how much of your income from real estate is taxed. It takes a bit of time and effort to wrap your head around all the rules, but the financial rewards are absolutely worth it.
Mortgage interest
The most basic tax deduction every landlord should know is the mortgage interest deduction. As a real estate investor, you can deduct the amount you paid in interest from your income. That amount will be reflected in Form 1098, which you will receive from your mortgage lender if you paid more than $600.
Property taxes
Property taxes are considered a necessary expense, and you can deduct the whole amount from your federal taxable income—even if the amount is more than $10,000, which is the state and local taxes (SALT) cap and includes personal property taxes.
The SALT cap has been an issue for business owners who also live in a high-tax area (e.g., New York or California) and pay a lot in mortgage interest and property taxes, which can easily add up to more than $10,000. From 2025 and until at least 2029, however, this cap will be raised to $40,000 for married couples, which is great news for those investors who are also paying high taxes on their own family homes, in addition to their investment properties.
The deduction will work especially well for smaller-scale investors earning under $500,000, because, under current proposals, the cap will decrease for those earning more than $500,000 and remain at $10,000 for those earning over $600,000.
$2,500 de minimis election
A less obvious and less-used deductible is the so-called de minimis safe harbor election. This deduction allows business owners to expense certain lower-cost expenses immediately rather than capitalizing them.
As a real estate investor, you could expense things like equipment or building improvements, up to $2,500 per invoice for most private investors/LLCs. Expensing items like building supplies and small repairs can help reduce your taxable income.
The beauty of this rule is that, if each invoice is under the threshold, you will only need to keep a record of the amount paid (although you should still keep itemized invoices for what it is you’re expensing). You can only expense small repairs this way; larger home improvements must be depreciated (we’ll talk about depreciation in a minute). You’ll also need to include a statement with your tax return explaining your election.
If you decide to apply the de minimis election to some supplies or materials, you’ll have to expense all of them this way, unless you decide to use depreciation.
Mileage
Do you make regular trips to collect rents, inspect your rental properties, and meet with contractors and prospective tenants? You can deduct the cost of this business-related commuting from your taxable income.
There are a few caveats. One is that trips made from your primary residence and rental properties are nondeductible unless your home is registered as your “principal place of business.”
You also have two options: deducting on a mileage basis (at $0.70 per mile in 2025), in which case you’ll need to keep a mileage log; or deducting on the actual expenses method, where you’ll take the total cost of everything vehicle related, including insurance, maintenance, and fuel—and then deduct the portion used for business travel.
You can only use one or the other.
Home office expenses
Similarly, you can deduct a portion of your household expenses such as utilities if you are using a designated space in your own home exclusively for business purposes (e.g., you have a home office). You can deduct $5 per square foot of the designated business space, up to 300 square feet, and $5 per square foot in utilities. Alternatively, you can once again use the actual expenses method, working out the exact footage and utilities and deducting the percentage that is used for business.
Phase 3: Depreciation and 2025 Bonus Rules
As of 2025, bonus depreciation is back for assets placed in service after Jan. 19, 2025.
What does that mean for investors? You have a choice: Use traditional depreciation over time, or deduct the cost of certain assets right away, up to 100% of the cost of the property. These assets include machinery and equipment, some home improvements (like HVAC upgrades), and business vehicles (especially heavy trucks used for property maintenance), among others.
Being able to write off the cost of the items can significantly improve cash flow by reducing your tax burden. However, you should always perform a cost segregation study to understand which assets qualify, and how much of a deduction you’d be looking at. In many cases, you could end up at significant tax burden reductions.
For example, let’s imagine you bought a $1 million duplex. A standard depreciation deduction might allow you to write off about $30K in taxes, based on a 27.5-year depreciable basis. But if you (with the help of a team of finance and engineering experts) conducted a cost segregation study and found that the building’s plumbing has a $120K depreciation value over a five-year period, plus the same again for the electrics, storm and drainage reinforcement, roofing, and new curbing/driveway, you could be looking at an $120K write-off in the first year.
You will need to file Form 4562 to claim depreciation.
Phase 4: Key Forms and 2025–2026 Deadlines
Filing on time is key. Here are the deadlines for all the main forms real estate investors typically need to submit:
Schedule E: April 15, 2026 (Oct. 15 if you filed an extension request by April 15)
Form 4562: April 15, 2026 (March 15, 2026, for partnerships and multimember LLCs)
Form 8824: April 15 following the year of the sale/exchange
Form 1040-ES: Quarterly estimated tax payments must be made by April 15, June 15, Sept. 15, and Jan. 15 of the following year for the fourth quarter.
Being Prepared Is Being Organized
Keeping track of all the documentation, deduction options, and deadlines can be daunting, especially if you’re a new investor.
That’s where Baselane comes in: Our banking platform is created especially with real estate investors in mind, helping you with everything from bookkeeping to rent collection. Having everything in one place can make a huge difference come filing day!
