Property Taxes

• Internal Revenue Service regulations allow both homeowners and rental property owners the option of deducting taxes paid to local, county and state agencies based on the value of the real property. Taxes paid during a residential home or rental property closing also qualify as deductible for federal taxes. Property taxes used by local governments to improve the value of the property, such as street repair assessments, however, cannot be deducted by owners of either residential or rental properties.
  
  

Mortgage Interest

• IRS Publication 936 "Home Mortgage Interest Deduction" outlines filing rules for homeowners itemizing the legal deductions for a main or secondary home, including mortgage interest paid to lenders, interest paid at escrow settlement and mortgage points paid when purchasing a home. Property owners had a $1.1 million cap on deductible personal homeowner mortgage interest in 2011. Residential filers use form 1098, Mortgage Interest Statement. The IRS Publication 527 "Residential Rental Property" offers specific guidelines for rental properties. Rental rules specify allowable mortgage interest deductions on income property, generally without an upper-limit cap for rental property. Rental owners use Schedule E to report mortgage interest.
  
  

Repair and Maintenance Costs

• Homeowners spending funds to repair, modernize and replace structural items around the house generally have no outlet for federal tax write-offs. Exceptions included various rebates for replacement using energy-efficient windows and doors and additional installation of energy-saving insulation between 2009 and 2012. Rental property owners legally write off costs on federal taxes for lawn maintenance; system repairs, including plumbing; electric and natural gas; appliance replacement; and any system or structural modernizations.
  
  

Taxes Due at Sale

• Homeowners selling a home for more than the initial purchase cost qualify for a homeowner tax deduction to offset the profit of up to $500,000 for married filers in 2011, provided the home was their primary residence. The profits for rental properties earning the same appreciation at the time of sale do not qualify for the same write-off. Rental property owners depreciating the property over time on tax forms must pay taxes on the profit and also taxes on the depreciation amount when the income property sells.
  
  

Insurance Costs

• Homeowners cannot deduct the cost of insurance coverage for their own residence, including hazard, earthquake and flooding, but owners of rental property have the right to deduct all of these insurance payments for income-producing houses and apartment buildings. Mortgage insurance mandated by the mortgage lender when included as part of the mortgage payment, is also deductible for both residents and landlords.