Owning a rental property often means wearing many hats—landlord, accountant, and sometimes even handyman. So, you figure, you might as well benefit from all that hard work. So, if you’re taking care of repairs yourself, can you deduct the cost of your own labor on a rental property?
It’s a fair question, especially with taxes always creeping up. After all, hiring contractors is deductible, so shouldn’t your own hard work count too? In this guide, we’ll break down what the IRS says about personal labor deductions and share smarter tax strategies to help you maximize your savings. Read on to learn more.
Main Takeaways
- You cannot deduct taxes on your own labor. That counts as a personal contribution. However, there are other ways you can save on your rental expenses, like contractor and material costs.
What Is “Own Labor” in Tax Terms?
Let’s simplify it with an example. So, normally, you can deduct labor costs when you hire someone to work on your rental property. But what if you’re doing the work yourself? Can you deduct your own labor on rental property? Although it can be a challenging topic, don’t worry—we’ve got you covered. As property managers in Philadelphia, PA, we know how to help you navigate these tax rules with confidence.
“Own labor” tax isn’t an official IRS term, but in simple terms, it refers to the idea of taxing or deducting the value of your own labor when you work on your rental property. Since you’re not paying yourself a wage, there’s no actual tax on your labor—but at the same time, you cannot deduct it as an expense.
This leads us to an important question: What does the IRS say about deducting personal labor? Let’s break it down.
Can You Deduct Your Own Labor on a Rental Property?
So, can you claim your own labor as a deduction on your rental property? According to the IRS, the work you do on your property counts as a personal contribution, not a business expense. The IRS only allows deductions for real expenses—like paying contractors, buying materials, or hiring property managers. So, even if your work saves you money, it doesn’t count as a deductible business expense. In other words, you can’t deduct the hours you spend painting, repairing, or maintaining your rental.
On the other hand, hiring contractors is deductible. Doing that does come with upfront costs, but it can save you time and tax benefits on the long run. That’s why many landlords balance hands-on work with outsourcing to maximize tax benefits.
That said, your efforts aren’t wasted. The concept of sweat equity still holds value. Even though you can’t claim a tax deduction from your hands-on work, it increases your property’s appeal and market value, which can attract better tenants and higher rent in the long run.
Now, while this is one way to save, there are other strategies available. Let’s explore those in the next section.
Other Ways to Get a Tax Break
So, now we know that you can’t deduct your own labor on a rental property. However, as a property owner, you have other smart tax strategies at your disposal to lower your taxable income and keep more money in your pocket. Here are some of the best ones:
Depreciation Deduction
The IRS allows you to deduct the depreciation of your rental property over time—typically 27.5 – 30 years for residential rentals. The IRS considers that duration as the “useful life” of your property. This allows you to deduct a portion of your property’s value each year, even while earning a profit.
Deducting Mortgage Interest
If you have a mortgage on your rental property, you can fully deduct the interest you pay on it each year. This helps lower your taxable income. Then, you keep more of your rental earnings instead of paying them in taxes. It’s one of the biggest tax benefits property owners can get, so be sure to take advantage of it!
Property Tax Deductions
The property taxes you pay to the county or state are deductible on your federal tax return, which can help you lower your annual tax bill. However, where you deduct them—and how much you can deduct—depends on the type of property you own. Be sure to keep that in mind.
Repairs and Maintenance Costs
While you cannot deduct your own labor, as we covered, you can deduct the cost of materials and any hired labor for property repairs, painting, plumbing fixes, and more. So, there’s one big area you can use to benefit.
Home Office Deduction
If you have a dedicated space at home where you manage your rental business—handling paperwork, communicating with tenants, or scheduling maintenance—you may qualify for a home office deduction. This allows you to deduct some of your rent/mortgage, utilities, and internet expenses from your taxes. So, you can put that on your list of savings.
Travel and Mileage Deductions
If you drive to your rental property for inspections, repairs, or meetings, you can deduct mileage, gas, and other travel-related expenses from your tax load. And here’s a bonus— the IRS mileage rate for business use was 67 cents per mile in 2024 and went up to 70 cents per mile in 2025. That might not seem like much, but those miles can add up fast and make a real difference in your tax savings!
Legal and Professional Fees
As a landlord, any fees you pay to your property managers, accountants, lawyers, or tax professionals are deductible business expenses. Because of that, you can save on these services’ taxes.
Insurance Premiums
Any money you spend on insurance for your rental property can be deducted from your taxable income. This covers things like general coverage, liability, or even an umbrella policy for extra protection. All in all, it’s an effective way to reduce taxes while ensuring your investment is secure.
1031 Exchange for Capital Gains Deferral
If you ever decide to sell your rental property, a 1031 exchange lets you reinvest the money you make from the sale into a new property without having to pay capital gains tax right away. Normally, when you sell a property for more than you bought it, you owe taxes on the profit. But with a 1031 exchange, you can skip paying that tax for now and use all your proceeds to buy another rental property. This way, you can keep your wealth-building process going without being stopped by immediate tax bills.
Pass-Through Deduction (Qualified Business Income – QBI)
If you earn rental income from your property, you might be eligible for a 20% deduction on that income through the Qualified Business Income (QBI) deduction. This tax break is available for landlords whose rental businesses are set up as pass-through entities (like sole proprietorships, LLCs, or partnerships). Basically, it allows you to deduct a portion of your rental income from your taxable income. In turn, that lets you keep more of your earnings. This deduction can be a big boon, especially for those with higher rental income, since it lowers your overall tax burden.
Want to Keep More of What You Earn? Turn to BMG
Unfortunately, you cannot deduct your own labor on a rental property. That counts as a personal contribution. However, there are other ways you can save on your rental expenses, like contractor and material costs.
Now that you know how to maximize your tax savings, it’s time to make them work for you. If managing the details feels overwhelming, Bay Property Management Group is here to help. Our professionals can handle accounting on your behalf. We can comb through all of your statements and the IRS’s policies to ensure you’re keeping as much of your profits as possible. And that’s not all: we also can deal with rent collection, marketing, inspections, maintenance, repairs, and more for you. Contact us today to start saving on your taxes and ensure your rental business is thriving!
