Ventura County has a lot of landlords. Some own a single condo in Oxnard they could not sell in 2010; some own a dozen units in Ventura; a growing number rent a beach house near the harbor by the week. The tax rules are the same for all of them, and the same mistakes show up on returns prepared without a CPA.

This is a general overview. Specific situations vary, and the dollar thresholds change over time.

Rental income and expenses go on Schedule E

Each property gets its own column. Rent received is income. The ordinary expenses of owning the property are deductible: mortgage interest, property taxes, insurance, HOA dues, utilities you pay, management fees, advertising, repairs, cleaning, legal and accounting fees, and mileage for trips to the property.

What is not deductible in the year paid: the purchase price, closing costs, and improvements. Those are recovered through depreciation.

Depreciation is the deduction people forget, and cannot skip

A residential rental building is depreciated over 27.5 years. Only the building counts; land is not depreciable, so the purchase price has to be split between the two, usually using the county assessor's ratio or an appraisal.

Two things surprise owners. First, depreciation is a real deduction that often turns a cash-positive rental into a paper loss. Second, when you sell, the IRS taxes the depreciation you took, or could have taken, at up to 25%. Skipping depreciation does not avoid that tax; it just forfeits the deduction. Every return should claim it.

Repair or improvement?

A repair keeps the property in its current condition and is deducted now: patching a roof, fixing a water heater, repainting. An improvement adds value or extends life and is depreciated: a new roof, a remodeled kitchen, a room addition. The line is not always obvious, and the IRS's tangible property regulations include safe harbors, such as one for small taxpayers with buildings under a certain value, that let some improvements be expensed. This is an area where a CPA earns the fee.

The passive loss rules

Rental losses are "passive" and generally can only offset passive income, not wages. There are two important exceptions:

  • The $25,000 allowance. If you actively participate in managing the rental and your adjusted gross income is under $100,000, you can deduct up to $25,000 of rental losses against other income. The allowance phases out entirely at $150,000 of income. Many Ventura County two-income households land in the phase-out and are surprised when the loss is suspended.
  • Real estate professional status. If you spend more than 750 hours a year, and more than half your working time, in real property businesses, losses may be fully deductible. The hour requirement is strict and the documentation has to exist before an audit, not after.

Suspended losses are not lost. They carry forward and are released when the property is sold.

Short-term rentals are different

A beach rental booked through Airbnb or VRBO may not be a "rental activity" at all for tax purposes if the average stay is seven days or fewer. That can move it off Schedule E and change how losses are treated, sometimes favorably. Local rules matter too: Oxnard and Ventura regulate short-term rentals and collect transient occupancy tax, and the platforms do not always handle all of it.

Selling: the part to plan years ahead

When a rental is sold, the gain is taxed in two layers: depreciation recapture at up to 25%, and the remaining appreciation at capital gains rates, plus California tax on the whole amount, since the state has no lower capital gains rate. On a property bought in Oxnard fifteen years ago, that can be a large number.

The main tools for managing it:

  • A 1031 exchange defers the tax by rolling the proceeds into another investment property under strict timelines: 45 days to identify, 180 days to close.
  • Moving back in for two of the five years before sale can shelter part of the gain under the primary-residence exclusion, with adjustments for the rental period.
  • Timing the sale into a lower-income year, or spreading it with an installment sale.

All of these work better with a year or two of notice. The worst time to ask an accountant about selling a rental is after escrow has closed.

If you own rental property in Ventura County and your return does not show depreciation, or shows the same "loss" every year with no explanation of where it went, have a CPA look at it. Amending a couple of years is routine and often pays. If the rentals sit inside an LLC, the entity choice matters too.