Webinar Recap: Is Your Rental Business Ready for Tax Season?

According to TaxFoundation.org, taxes are the average American’s biggest expense, costing more than food, clothing, and housing combined. However, tax law strongly favors real estate, so informed investors can build wealth while paying very little to no taxes.

In November 2025, TurboTenant hosted a webinar about preparing your rental business for tax season. We invited tax experts from Keystone CPA and the co-founder of our rental property accounting software to share high-level tax strategies and practical bookkeeping tips. In this article, we’ll share that information along with additional resources to help you prepare for tax season.

Key Insights

• Real estate offers powerful tax-saving opportunities when approached strategically.
• Many rental property owners lose money by failing to optimize deductions.
• Accurate bookkeeping is essential for maximizing tax advantages.
• Common bookkeeping errors can be costly and are easily avoidable.
• Accounting software designed for rental property can prevent costly mistakes and help identify missed deductions.

Meet the Experts

Adam Hamilton, Co-founder, REI Hub

Adam Hamilton is the co-founder of REI Hub, an accounting platform for rental property. His intersecting interests in real estate investing and data-driven small-business operations drove him to build rental property accounting software for the average person. His particular passion is demystifying basic bookkeeping for investors without a financial background.

Amanda Han, Tax Managing Director, Keystone CPA Inc.

Amanda Han has over 25 years of experience in public accounting. At Keystone CPA, she develops and implements tax-saving strategies for real estate investors, small- to mid-size businesses, and high–net–worth clients. As a CPA and real estate investor, Amanda has helped countless investors across the nation supercharge their wealth-building through proactive tax-saving strategies, as detailed in two books and numerous articles.

Matt MacFarland, Managing Director, Keystone CPA Inc.

Matt MacFarland brings over two decades of tax-planning expertise in working specifically with real estate investors and high–net worth individuals. Matt is an avid speaker and educator on real estate tax strategies, and he co-wrote The Book on Advanced Tax Strategies: Cracking the Code for Savvy Real Estate Investors.

Tax Strategies for Real Estate Investors

Real estate investing is one of the best ways to build wealth. With these two strategies, you can save on taxes for your rental business.

100% Bonus Depreciation

The One Big Beautiful Bill brought back 100% bonus depreciation, which can more than double first-year depreciation benefits. This powerful tool can offset other income, like W-2 wages.

Bonus Depreciation Case Study

Let’s look at how the 100% bonus depreciation deduction works. In this scenario, a W-2 couple has a combined income of $623,000, and they buy two short-term rentals. They use the short-term rental loophole, and with the accelerated 100% bonus depreciation, they can deduct an additional $290,000.

This reduces their taxable income by nearly $300,000, leading to projected tax savings of $112,000.

Looking for additional resources for short-term rental owners? We’ve got you covered:

• “The Short-Term Rental Tax Loophole (Explained for Landlords)”
• “7 Common Bookkeeping Errors for Short-Term Rentals”

Qualified Business Income (QBI) Deduction

With the QBI deduction, up to 20% of net rental income could potentially be tax-free. This also applies to other real estate-related income.

Key point: Neither benefit is applied automatically. To use them effectively, you must act proactively.

Common Tax Mistakes for Rental Property Owners

About 40% of real estate investors don’t optimize their tax returns. Avoid these common errors with your taxes.

Not Optimizing Depreciation

Many investors don’t optimize depreciation. Be strategic to make the most of your depreciation deductions: Speed it up by using a cost segregation study, slow it down, or catch it up. Remember that a property must be placed in service — meaning available for rent — before the end of the year for you to claim depreciation in that year.

Choosing the Wrong Legal Entity

Avoid S corps and C corps for holding real estate. They can trap leverage and depreciation, so you miss out on some tax benefits. LLCs, trusts, and partnerships are generally flexible and preferred.

Learn more about the entity options for real estate investors:

• “Structuring Your Rental Business: LLC vs C Corp vs S Corp.”
• “LLC for Property Rentals: Protect Your Bottom Line.”

Missing Tax Deductions

Investors often miss general overhead costs, such as home-office, auto, and travel expenses, and dues.

Not sure if you qualify for the home office deduction? Check out these resources from REI Hub:

• “Can Rental Property Businesses Take a Home Office Deduction?”
• “Calculating Your Home Office Deduction”

Not Shifting Income to Children

You can pay your child for work they do on the rental property, such as cleaning or admin tasks. That allows you to take a tax deduction while shifting income to them, which can fund a Roth IRA. Just make sure to pay them and complete the documentation before the end of the year.

Accurate Bookkeeping Supports Your Tax Strategies

Why Good Bookkeeping Matters

Accuracy matters in accounting. Keeping precise, organized records ensures that your tax returns are correct, reducing the likelihood of an audit. Plus, by maintaining good books throughout the year, you maximize your CPA’s value. When you hand over books that are already in order, your CPA can focus on high-level strategy instead of costly day-to-day data entry and corrections.

Why Rental Property Taxes Are Unique

Running a rental property isn’t the same as operating a service business. Three factors make real estate investments unique:

• Passive activity: Income from rental property generally counts as passive activity. You’ll report it on a separate form, either IRS Schedule E or Form 8825. For a full breakdown of the Schedule E, check out this resource: “Schedule E for Landlords: The Essential Guide to Rental Income Tax Reporting.”
• Cash basis: Rental property accounting is usually cash basis, so transactions are recognized when funds are spent or received in the current year. If you’re new to rental property or bookkeeping, you may benefit from this more detailed discussion of cash-basis accounting.
• Per-property tracking: Real estate investors are required to track income and expenses on a property-by-property basis.

Tracking Financial Transactions for Rental Property

Key Questions About Money Coming In

What counts as rent?

Everything received from a tenant counts as gross rent. This includes base rents, security deposits held, and fees for pets, parking, and late payments.

Are there any exceptions to what counts as reportable revenue?

Refundable security deposits and passed-through occupancy taxes do not count as rental revenue.

Do you report gross or net revenue?

Always report gross revenue. If a property manager deposits $1,000 after taking a $100 fee, you must report $1,100 in revenue and $100 as an expense.

Key Factors for Money Going Out

The costs of running a rental property business fit into four “buckets,” and the bucket an outlay falls into determines its tax treatment.

• Deductible Expenses

Your deductible expenses are ordinary and necessary operational costs, such as minor repairs, maintenance, and cleaning. These expenses affect your profit and loss and are immediately deductible on your Schedule E.

• Capital Expenditures

Capital expenditures are also known as leasehold improvements or fixed assets. These are substantial improvements or acquisitions, like the purchase of a new property or a roof replacement. Unlike deductible expenses, you’ll add fixed assets to the balance sheet and depreciate them over time.

• Loan Payments

Loan payments can be broken down into principal and interest. Only the interest is deductible and will show on your profit and loss report. The principal portion isn’t deductible and will affect the loan account on your balance sheet.

• Nondeductible Withdrawals

Nondeductible withdrawals are funds moving within your control. They’re usually called owner draws, owner distributions, or personal draws. These draws affect your balance sheet and can’t be deducted from your income.

Common Errors with Expenses

Avoid these two common bookkeeping errors for rental property expenses:

Escrow Contributions 

Do you pay the rental’s property taxes or insurance by depositing money into an escrow account every month as part of your mortgage payment? The actual tax and insurance payments paid out of escrow are deductible. Your mortgage lender will send you Form 1098, which lists the property tax and insurance amounts paid for the year. Use that figure — not the monthly contributions — as your deductible expenses.

Credit Card Payments

Your purchases may be deductible, but the payment for the credit card bill isn’t. The best practice is to record and categorize the individual transactions, then to reconcile the credit card account when the statement arrives. The credit card account is a balance sheet item, so the payment doesn’t affect your P&L.

Easily Missed Deductions and Software Solutions

As a rental property owner, you have many responsibilities, so it’s easy to miss a deduction. Using accounting software designed for real estate investors can help you catch those deductions and optimize your tax return.

With TurboTenant Accounting’s built-in tax prep tools, we’ll help you find easily missed deductions like these:

Missing Transactions 

When you have a dedicated bank account for the property, you can link it to your accounting software, then import the transactions. This ensures that all your activity is captured and reduces the potential for errors associated with manual entry in spreadsheets or templates.

Depreciation

Depreciation calculations can be complicated, but your software can track fixed assets, in-service dates, and useful life, making sure this crucial deduction is calculated correctly.

Learn more about depreciation and useful life for assets: “Depreciation Systems, Asset Class Life, and Recovery Periods for Rental Property.”

Overhead Costs

Forgetting to allocate overhead costs is common when you’re manually tracking expenses. With accounting software like TurboTenant, you can easily prorate portfolio-level expenses across all your properties for accurate Schedule E reporting.

Deductible Loan Expenses

Save time and headaches with our automated loan payment templates. This feature correctly splits your mortgage payments into the deductible (interest) and nondeductible (principal/escrow) components.

Insurance and Taxes

When you pay your insurance and taxes out of an escrow account, missing those deductions is simple. Software helps you track the actual amounts paid out of escrow, preventing those missed deductions.

For a deeper dive into rental-related deductions, refer to “Rental Property Tax Deductions: Maximize Your Tax Savings as a Landlord.”

Webinar Q&A Highlights

Should you set up an LLC?

Yes, setting up an LLC is a good way to protect your assets. LLCs, especially single-member LLCs, are generally preferred over S corps or C corps because they’re more flexible from a tax perspective and preserve key tax benefits. Consult with an attorney about your specific situation.

Can you claim miles with an electric vehicle?

Yes, you can claim business miles with an electric vehicle. However, you must still document business miles versus total miles to claim the deduction, regardless of vehicle type. Learn more about travel-related costs with these resources:

• “Leveraging Mileage Deductions in Your Rental Business”
• “How to Handle Expenses for Out-of-Town Travel Related to Your Rental Property Business”

Do you need documentation when paying your kids to work on your rental?

Yes, you need documentation when you pay your children to work in your rental business. Treat them like any other employee or contractor: (1) Document a job description. (2) Pay them a reasonable rate (fair market value). (3) Track their time. (4) Provide actual money transfers and tax forms, like a W-2 for recurring work or a 1099 for onetime help.

How do you handle nondeductible transfers?

Money transfers between your internal bank accounts or payments to your credit card vendors are not deductible. Only transactions where the money leaves your control to a vendor may qualify as a deductible expense.

Are training videos available for TurboTenant Accounting’s tax automation features?

Yes! We can provide live or recorded demos of TurboTenant Accounting. Reach out to [email protected] for more information.

Resources and Next Steps

Read TurboTenant’s Tax Prep Guide for Rental Property Owners: 2025 Edition.

Download Keystone CPA’s Tax Savings Toolkit.

Simplify your rental property bookkeeping. Sign up for TurboTenant Accounting today!