Between property taxes, maintenance, and the day-to-day costs of ownership, it’s easy for profits to get squeezed in a state like New York, where expenses can add up quickly. That’s why understanding which tax deductions you can claim is so important.
By making the most of every eligible deduction, you can help your investment remain as profitable as possible, year after year.
New York rental property tax deduction rules
Landlords in New York face complex rental property rules and regulations. Understanding the ins and outs (and how they apply to your specific property) can help you keep more of your rental income and avoid surprises at tax time.
Here are some of the most important deductions and programs to be aware of:
New York City additional income tax deduction
If your rental property is located in New York City, you’ll need to account for the city’s additional local income tax on rental income, which ranges from 3.078% to 3.876% depending on your income level.
While this adds to your tax bill, there’s a silver lining: the city income tax you pay on your rental income is deductible on your federal tax return as a state and local tax deduction.
This benefit is specific to NYC landlords and can help offset some of the higher costs of owning property in the city.
No SALT cap on rental property tax deductions
While New York homeowners are subject to the $10,000 federal state and local tax (SALT) deduction limit, rental property owners are not. Property taxes paid on your rental are considered business expenses and are fully deductible on your federal tax return (reported on Schedule E).
Rental property loss deduction
If your rental expenses exceed your rental income, you may be able to deduct up to $25,000 in rental losses from your ordinary income if your modified adjusted gross income (MAGI) is $100,000 or less.
This deduction gradually phases out as your income rises above $100,000 and is fully phased out at $150,000. Any unused losses above the limit can generally be carried forward to future tax years.
New York State sales tax on short-term rentals
If you rent out your property for less than 90 days at a time, New York State requires you to collect a 4% sales tax on those short-term rental stays. The good news is that any sales tax you collect and remit to the state reduces your rental income for tax purposes, so you’re not taxed on money you simply pass through to the government.
Property tax exemptions (primarily for multifamily and new construction)
While most single-family and small rental property owners won’t qualify, it’s worth being aware of several property tax exemption programs that can significantly reduce property tax liability for certain types of rental properties:
- Section 421-a (NYC only): Offers partial property tax exemptions for new multifamily dwellings in New York City, with exemption periods ranging from 13 to 28 years.
- Section 421-p and 421-pp (outside NYC): Provide tax exemptions for newly constructed or converted rental properties—mainly multifamily or affordable housing developments.
- Affordable Housing from Commercial Conversion (AHCC) Program: Offers substantial tax discounts for commercial-to-residential conversions that include affordable units.
- Accessory Dwelling Unit (ADU) Tax Exemption: If you add an ADU to your property, you may be eligible for a tax exemption on the increased value from the addition, helping to keep your overall property taxes in check.
Other rental property tax deductions in New York
Beyond state-specific rules, New York landlords can claim a wide range of federal deductions for rental property expenses. These deductions are reported on IRS Schedule E (Form 1040) and can make a substantial difference in your bottom line.
Here are some of the most common categories to track:
Repairs and maintenance
- Fixing plumbing or electrical issues
- Appliance repairs and replacements
- Landscaping and snow removal
- Pest control services
Insurance premiums
- Landlord or rental property insurance
- Flood insurance (if required)
- Umbrella liability insurance
Mortgage interest
- Monthly interest on rental property mortgage
- Interest on loans for property improvements
Property management and professional fees
- Property management company fees
- Attorney fees for lease agreements or disputes
- Accounting services and tax preparation
- HOA or condo association fees
Advertising and tenant screening
- Online and print rental ads
- Application and background check services
Utilities and operating expenses
- Water, sewer, and trash collection
- Gas and electric bills
- Internet or cable provided to tenants
- Security system monitoring
Supplies and miscellaneous expenses
- Cleaning supplies and equipment
- Keys, locks, and rekeying services
- Small tools for property maintenance
- Office supplies (paperwork, postage)
Depreciation
- Residential building (not land)
- Major appliances
- Roof replacements and HVAC systems
- Substantial renovations or capital improvements
- Fencing and driveways
Tips for managing your rental property taxes, income, and expenses
To help your rental property management operations run smoothly, we recommend keeping meticulous records of all income and expenses related to your rental property. These records should include rent payments, maintenance costs, and property improvements.
A comprehensive management platform like Stessa makes this easy.
Stessa can import, categorize, and index all your expenses securely and seamlessly. Connect to banks, lenders, credit cards, and property managers to see all your data in one place:
- Bookkeeping: Traditional double-entry bookkeeping can be overkill for most rental property owners. Stessa keeps accounting easy so you can focus on growing your portfolio.
- Mobile app: Scan receipts to maximize tax deductions, categorize income and expenses on the go, and retrieve your data from virtually anywhere.
- Financial reporting: Stessa’s real-time dashboards and advanced reports help you own and manage your property like the pros.
With Stessa Cash Management, you also get a dedicated bank account for your rental business to simplify tracking your cash flow and expenses. This feature allows you to set up an unlimited number of accounts, requires no minimum balance, includes a cash-back debit card, and offers a competitive APY.
Plus, you get a personalized tax package with our Tax Center, which includes an income statement, net cash flow report, and a ZIP file with receipts for backup.
Get started with Stessa for free and gain access to our comprehensive landlord tools and accounting resources.
The information contained in this article is provided for informational purposes only and should not be construed as legal, tax, or financial advice on any matter. Stessa is not liable for any actions taken or not taken based on the contents of this article and advises readers to seek professional legal, tax, or financial advice on which to base their decisions.
