Real estate investing offers tremendous tax advantages—but only if you know how to leverage them. As we move through 2025, it’s more important than ever for investors to understand which deductions and strategies are available to reduce taxable income. Whether you own a single rental property or manage a large portfolio, here are six powerful tax-saving opportunities every real estate investor should know.
1. Depreciation
Depreciation allows you to recover the cost of your rental property over time. The IRS lets you deduct a portion of the building’s value each year—27.5 years for residential and 39 years for commercial. This non-cash expense can significantly reduce your taxable rental income.
2. Cost Segregation Studies
A cost segregation study is a strategic way to accelerate depreciation by identifying parts of the property—like appliances, flooring, or landscaping—that can be depreciated over 5, 7, or 15 years instead of 27.5 or 39 years.
Why it matters in 2025: With bonus depreciation at 60% this year, a cost seg study can front-load significant deductions—especially helpful for high-income years or newly acquired properties.
3. Mortgage Interest
Interest on loans used to purchase or improve your rental properties is fully deductible. For many investors, this is one of the largest annual expenses, and it can meaningfully lower your net taxable income.
4. Repairs and Maintenance
Immediate deductions are allowed for repairs that keep your property in good working condition—such as plumbing fixes, patching a roof, or repainting. These are different from capital improvements, which must be depreciated over time.
5. Professional Services and Property Management Fees
Expenses for CPAs, attorneys, bookkeepers, and property managers are all deductible. If you self-manage, you may still deduct related costs such as accounting software, legal subscriptions, and your mobile business expenses.
6. Travel and Mileage
Miles driven for property visits, tenant meetings, and inspections can be deducted at the IRS standard mileage rate. Out-of-town travel (flights, lodging, rental cars) may also be deductible if it directly relates to managing or acquiring investment properties.