IRS Publication 527 — Residential Rental Property

For the latest information about developments related to Pub. 527, such as legislation enacted after it was published, go to IRS.gov/Pub527.

What’s New Standard mileage rate. For 2025, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck increased to 70 cents a mile.

Bonus depreciation. The 100% special depreciation allowance is restored for qualified property acquired and placed into service after January 19, 2025. However, property put into service between January 1, 2025, and January 19, 2025, or acquired before January 20, 2025, and put into service later will remain subject to the phase-down rules under prior law. For more information, see Form 4562, Depreciation and Amortization and its instructions. Increased section 179 deduction dollar limits. For tax years beginning in 2025, the maximum section 179 expense deduction is $2,500,000. This limit is reduced by the amount by which the cost of section 179 property placed in service during the year exceeds $4,000,000. Business interest expense limitation. The business interest expense in your rental real estate activity may be limited. For tax years beginning in 2025, the calculation of adjusted taxable income includes a requirement to add back to taxable income the deductions for depreciation, amortization, and depletion to arrive at the amount that is used to determine if your interest expense is limited. For more information, see Form 8990, Limitation on Business Interest Expense Under Section 163(j), and its instructions. No tax on car loan interest. If you are self -employed and use your vehicle for personal and business use, you may be eligible to take a deduction for the interest for the personal use on Schedule 1 -A (Form 1040). You can only deduct the part of the interest expense that represents the business use of your vehicle on Schedule E (Form 1040). See the Instructions for Schedule 1 -A (Form 1040) for more information.

State and local tax (SALT) deduction limit increased. The overall limit on the deduction for state and local income, sales, and property taxes has increased to $40,000 ($20,000 if married filing separately). The overall limit is reduced if your modified adjusted gross income is more than $500,000 ($250,000 if married filing separately) but will not be reduced below $10,000 ($5,000 if married filing separately). See Worksheet 5-1, later.