What is the biggest tax mistake landlords make?

Not taking depreciation. Depreciation is required by the IRS—you MUST claim it or face recapture tax on the full amount when you sell regardless. Many landlords skip it, thinking they're saving for later. You're not: you'll pay recapture tax anyway, AND you miss years of deductions. For a $200,000 property, that's ~$5,800/year in lost deductions.

What's the difference between repairs and improvements for taxes?

Repairs maintain current condition and are fully deductible immediately (fixing leak, painting, replacing broken appliance). Improvements add value, extend life, or adapt to new use—must be depreciated over 27.5 years (new roof, kitchen remodel, adding rooms). Improper classification is a top audit trigger. When in doubt, consult a tax professional.

Can I deduct rental property losses against my regular income?

Usually no—rental losses are 'passive' and can only offset passive income. Exception: if your AGI is under $100,000 and you 'actively participate,' you can deduct up to $25,000 in losses against regular income (phases out $100-150K AGI). Real estate professionals with 750+ hours can deduct unlimited losses. Excess losses carry forward to future years.

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15 Costly Tax Mistakes Landlords Make (And How to Avoid Them)

Leaseway Team

Property Management Experts

December 22, 202513 min read

Tax forms and calculator for rental property tax preparation

Article Summary

Don't leave money on the table or trigger an audit. Learn the most common tax mistakes landlords make and how to avoid them.

Published: December 22, 2025Updated: December 24, 2025

Landlords overpay taxes every year due to common mistakes. Here are the 15 most costly errors and how to fix them...

Sources & References

IRS Publication 527 - Residential Rental Property
AICPA - Rental Property Tax Guide
BiggerPockets - Tax Mistakes

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Leaseway TeamProperty Management Experts

The Leaseway Team brings together decades of combined experience in Indianapolis property management, real estate investing, and landlord-tenant relations. Our experts are dedicated to helping property owners maximize their investments.

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