How To Deduct Cleaning Fees For Rental Properties

Article Summary

Deducting cleaning fees for rental properties directly impacts landlords, vacation rental hosts, and real estate investors by reducing taxable income and improving cash flow. In the U.S., improper classification of these expenses can trigger IRS audits or state-level penalties, particularly in jurisdictions like California or New York with stringent documentation requirements. Immediate consequences include recaptured deductions and interest charges, while long-term risks involve loss of passive activity loss allowances. Eligibility hinges on adherence to IRS “ordinary and necessary” standards, precise allocation for mixed-use properties, and compliance with state-specific rules governing security deposit offsets for cleaning costs.

What This Means for You:

• Immediate Action: Separate cleaning costs from capital improvements (e.g., pressure washing vs. replacing carpets) and obtain itemized invoices from service providers.
• Financial Risks: States like California prohibit deducting cleaning fees covered by non-refundable tenant deposits under Civil Code §1950.5.
• Costs Involved: Expect $100-$500 per cleaning deductible at the federal level, minus any state-specific limitations like Hawaii’s 4.712% transient accommodations tax.
• Long-Term Strategy: Implement a receipt-tracking system aligned with IRS Publication 583 standards to substantiate deductions spanning multiple tax years.

Explained: How To Deduct Cleaning Fees For Rental Properties

Under IRS Tax Code Section 162, rental property cleaning fees qualify as deductible operating expenses when they maintain (rather than improve) the property. Federal law permits deductions for routine cleanings between tenants, but states like Florida impose additional nuances—deep cleaning after long-term tenant departure may be deductible, while mold remediation requires capitalization per Florida Statute 718.112. The expense must also meet the “ordinary and necessary” test under Treasury Regulation 1.162-1, excluding personal-use cleaning (e.g., while occupying the property for vacation).

”How To Deduct Cleaning Fees For Rental Properties” Principles:

The “ordinary and necessary” principle under IRC §162 demands that cleaning fees be: 1) common in the rental industry (e.g., carpet cleaning between tenants), and 2) directly tied to income generation. Mixed-use properties (e.g., Airbnb units used personally 30 days/year) require proration using IRS Form 8829. In California, FTB Publication 1031 further requires allocation of cleaning costs between deductible rental days and non-deductible personal days using contemporaneous logs.

Standard Deduction vs. Itemized Deductions:

Rental cleaning fees are deducted on Schedule E (Form 1040), separate from personal itemized deductions. There is no standard deduction—all eligible expenses reduce rental income dollar-for-dollar. States like Pennsylvania mirror this treatment under PA Code §179.10, while Massachusetts imposes a $3,000 annual cap on cleaning deductions under MA General Law Chapter 62.

Types of Categories for Individuals:

Individuals may deduct: 1) Vacancy-related cleaning (preparing for new tenants), 2) Maintenance cleaning (monthly landscaping/trash removal), and 3) Emergency cleaning (post-disaster costs under IRS Disaster Loss rules). Passive investors subject to the $25,000 loss limitation under IRC §469 must track cleaning fees separately from active management expenses.

Key Business and Small Business Provisions:

LLCs and property management firms can deduct: 1) Commercial pressure washing under IRS Repair Regulations, 2) Move-in/move-out cleaning via accountable plans per Rev. Proc. 2019-44, and 3) Janitorial software subscriptions under “supplies” deductions. Short-term rental operators in cities like Portland must remit Clean Community Surcharges before deducting cleaning fees.

Record-Keeping and Substantiation Requirements:

Federal law (IRC §6001) mandates retention of: 1) Dated invoices specifying service type, 2) Proof of payment (canceled checks/digital receipts), and 3) Property usage logs for mixed-use. California requires 4-year retention under FTB Notice 2022-06. Auditors disallow deductions lacking vendor EINs or tenant turnover dates.

Audit Process:

IRS examiners verify cleaning deductions by cross-referencing: 1) 1099-MISC/1099-NEC filings from cleaners, 2) Lease agreements showing vacancy periods, and 3) Security deposit ledgers. New York auditors apply stricter scrutiny to fees exceeding $1,000 via NYS TP-600 Checklist.

Choosing a Tax Professional:

Select CPAs with §469(h) passive activity expertise or Enrolled Agents certified in state-specific rules (e.g., Texas franchise tax implications). Verify experience with STR platforms like VRBO, which issue 1099-K forms affecting deductible cleaning expenses.

Laws and Regulations Relating To How To Deduct Cleaning Fees For Rental Properties:

Federal: IRS Publication 527 (Rental Expenses) details deductible cleaning costs under “maintenance vs. improvement” tests. Revenue Ruling 73-210 disallows deductions if fees are covered by security deposits unless legally retained. State: California’s FTB Schedule CA adjustments require adding back improperly deducted fees under CCR §17081. Virginia applies a 2% floor under VA Code §58.1-320 to cleaning fees exceeding $1,200 annually.

People Also Ask:

Can I deduct deep cleaning costs after pet damage?

Only portions not covered by pet deposits qualify under IRC §262 (nondeductible personal expenses). Document damage reports and prorate fees—e.g., $300 deep cleaning minus $200 pet deposit = $100 deductible.

Are Airbnb turnover cleaning fees deductible?

Yes if the fee is itemized separately on guest receipts (IRS Topic 511). However, platform service fees are nondeductible under Rev. Rul. 2000-35.

How does California treat cleaning fee deductions for vacation homes?

FTB Legal Ruling 2010-01 disallows any cleaning deductions if personal use exceeds 14 days or 10% of rental days—whichever is longer.

Extra Information:

• IRS Publication 527: Details deductible cleaning vs. capital improvements.

• FTB Publication 1031: California-specific rental expense guidelines.

Expert Opinion:

Failure to distinguish between deductible routine cleaning and non-deductible property enhancements triggers over 30% of rental-related audits. Regional tax boards increasingly cross-reference licensing records for cleaning vendors, necessitating flawless documentation to withstand scrutiny.

Key Terms:

• IRS cleaning fee deduction rental property
• Airbnb turnover cleaning tax write-off
• California security deposit cleaning laws
• Ordinary and necessary expense test rentals
• Mixed-use property cleaning cost allocation

*featured image sourced by DallE-3