Can You Deduct Mortgage Interest, Insurance, and HOA Fees on a Rental in 2025?
“I’m renting out my property, but can I actually deduct the mortgage interest?”
“What about homeowners insurance or monthly HOA fees?”
These are some of the most common landlord questions as tax season approaches.
In this guide, we break down how rental-related expenses are deducted in 2025—including Schedule E vs Schedule A, mixed personal and rental use, HOA special assessments, and short-term rentals like Airbnb—with a practical, audit-defensible approach.
1️⃣ Quick Summary (Read This First)
- Mortgage interest, insurance, and HOA fees are deductible only for the rental portion of the property.
- If you use the property personally, expense allocation is mandatory (it’s not optional).
- If personal use is high, vacation home rules may apply—often limiting deductions to rental income.
② If rented more than 14 days: Did you personally use it more than 14 days OR 10% of rental days (whichever is greater)? → Vacation home rules may apply.
③ Otherwise → It’s usually treated as a standard rental (still subject to passive loss rules).
2️⃣ Mortgage Interest: Schedule E or Schedule A?
Mortgage interest is not automatically “rental deductible.”
The key question is how the property is used during the year—and whether any personal use exists.
| Property Use | Where It’s Deducted | Notes |
|---|---|---|
| 100% Rental | Schedule E | Fully deductible as a rental expense (subject to loss limits) |
| Rental + Personal Use | Schedule E / Schedule A | Allocated based on use (rental share to E; personal share may go to A if qualified) |
| Rented 14 days or fewer | Schedule A only | Rental income excluded; rental expense deductions generally disallowed |
Suppose you paid $14,980 in mortgage interest this year.
The property was rented for 228 days and used personally for 137 days.
The rental portion is generally calculated using a day-based allocation:
228 ÷ (228 + 137) = 62.45% (approx.)
→ Schedule E portion: $14,980 × 62.45% ≈ $9,356
→ Remaining portion may be personal mortgage interest on Schedule A if it qualifies under the normal home mortgage interest rules.
Start with Form 1098, Box 1 (“Mortgage interest received”) and document how you split it between rental and personal use.
3️⃣ Insurance Premiums: Yes, But Timing Matters
Insurance premiums tied to rental activity—such as landlord policies, liability coverage, or dwelling coverage—are generally deductible.
If the property is mixed-use, only the rental share qualifies.
Also, prepaid coverage may need to be deducted over the period it applies (instead of all at once).
You prepaid a $2,640 insurance policy in July covering 12 months (July–June).
A conservative approach is to deduct only the portion that applies to the current tax year, then deduct the remainder next year as it applies.
Keep the declarations page (policy period + premium). That single page often answers 90% of “timing” questions.
4️⃣ HOA Fees and Special Assessments
Monthly HOA fees are often deductible to the extent the unit is rented.
Special assessments need one extra step: you must identify what the assessment paid for.
- Maintenance or repairs: Often deductible in the current year (rental portion only)
- Capital improvements: Typically capitalized and depreciated
An assessment for hallway repainting may qualify as a repair/maintenance-type cost.
A building-wide roof replacement is more likely a capital improvement that is recovered through depreciation over time.
Capital improvements usually don’t give you a full deduction today—but they can increase your property’s tax basis (or building basis),
which may reduce taxable gain later and can also be recovered through depreciation in the meantime (depending on facts and allocation).
Keep monthly HOA statements and any assessment notices. They’re often the cleanest proof of what the fee actually covered.
5️⃣ Allocating Expenses: Days vs Square Footage
Allocation is required when personal and rental use overlap.
The method depends on how the property is used (whole home vs partial area).
| Situation | Allocation Method | Example |
|---|---|---|
| Entire home rented part-time | Days rented | Rental days ÷ total days used |
| One room rented | Space × time | (Rental sqft ÷ total sqft) × (rental days ÷ days used) |
Don’t allocate using “365 days” by default if the home wasn’t actually used all year.
A defensible method tracks rental days, personal-use days, and vacant/not-used days clearly.
6️⃣ Watch Out for Vacation Home Rules
If personal use exceeds 14 days or 10% of rental days (whichever is greater),
the property may fall under vacation home rules.
When vacation home rules apply, deductible expenses may be limited to rental income—often preventing large rental losses
(even if the expenses are “real” and paid).
Rental days: 150 → 10% of rental days = 15
Threshold is the greater of 14 or 15 → 15 days
If personal use is 16 days or more, vacation home rules may apply.
7️⃣ Airbnb: Schedule E or Schedule C?
Most short-term rentals are still reported on Schedule E.
However, if you provide substantial services to guests, the activity can start to look like a business—pushing reporting toward Schedule C.
- Daily housekeeping (not just turnover cleaning between guests)
- Meals, breakfast service, or on-demand food delivery as part of the stay
- Hotel-like guest services (concierge, tours, daily linen service, constant on-site support)
Schedule C treatment can trigger self-employment tax and may change how losses are treated.
If you’re near that “hotel-like services” line, document what you actually provide (and what you don’t).
🔻 Most-Asked Google Questions
• Are HOA special assessments deductible?
Maintenance-type costs are often deductible (rental portion only). Improvement-type costs are generally capitalized and depreciated.
• Is Airbnb income always Schedule E?
Often yes, but providing hotel-like substantial services can shift treatment toward Schedule C.
• Can I deduct prepaid insurance in full?
A conservative approach is to deduct only the portion that applies to the current tax year, then deduct the rest as it applies.
Tax Professional’s Note
Rental deductions aren’t about “maxing out the numbers.” They’re about building a return that stays consistent, documented, and defensible if the IRS asks how you got there.
This article is for educational purposes only and reflects U.S. federal tax rules. State tax rules may differ.
Actual results depend on property use, services provided, and individual circumstances.
This content does not constitute personalized tax advice. Consult a qualified tax professional before filing.