What taxes do landlords pay on rental income in New York?

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Rental income in New York is subject to both federal and state taxes. Understanding what you owe — and what you can deduct — is one of the most important financial decisions you make as a landlord.

Federal taxes on rental income:

All rental income must be reported on your federal tax return (Schedule E, Form 1040)
Net rental income (after deductions) is taxed at your ordinary income tax rate
The IRS 40x rule does not apply to landlords — you are taxed on actual net profit

New York State taxes on rental income:

New York State income tax applies to all rental income earned from NY properties, even if you live out of state
NYC landlords also pay New York City income tax on top of state tax
NY State income tax rates range from 4% to 10.9% in 2026 depending on your total income bracket

Key deductions landlords can claim in New York:

Mortgage interest on the rental property
Property taxes
Depreciation (residential rental property depreciates over 27.5 years under IRS rules)
Repairs and maintenance costs
Property management fees
Advertising and listing costs
Insurance premiums
Utilities paid by the landlord
Legal and professional fees related to the rental

Important: Improvements (renovations that add value or extend the property's life) must be depreciated, not immediately deducted. Repairs (restoring to original condition) can be deducted in the year they occur.

Tips for landlords on taxes:

Keep all receipts and maintain a separate bank account for rental income and expenses
Track mileage for property-related trips — this is a deductible business expense
Consider working with a CPA who specializes in New York real estate to maximize legitimate deductions
Report all income — the IRS cross-references 1099 forms and underreporting rental income is a common audit trigger