Top 5 New Tax Laws and Changes for Rental Property Owners in Encinitas and Surrounding Areas in 2026

Owning rental properties in Encinitas and nearby areas comes with unique opportunities and challenges, especially when it comes to taxes. The tax landscape is shifting in 2026, and rental property owners must stay informed to make the most of these changes. Understanding the new tax laws can help you improve your tax optimization for rental property owners, reduce liabilities, and increase your rental income’s profitability.

This post highlights the top five tax law changes that will affect rental property owners in Encinitas and surrounding communities. Each change includes practical examples and tips to help you navigate the new rules confidently.

2026 brings a lot of changes and opportunities for rental property owners.

1. Changes to Depreciation Rules for Residential Rental Properties

One of the biggest updates in 2026 involves how depreciation is calculated for residential rental properties. The IRS has shortened the recovery period from 27.5 years to 25 years for properties placed in service after January 1, 2026. This means you can write off the cost of your property faster, improving cash flow.

Example:

If you bought a rental home in Encinitas for $550,000 (excluding land value), you could previously deduct about $20,000 per year in depreciation. Now, you can deduct $22,000 annually, which means more tax savings sooner.

Tip:

Review your property’s placed-in-service date and adjust your depreciation schedules accordingly. This change supports better tax optimization for rental property owners by accelerating deductions.

2. New Limits on Deductible Property Taxes

California’s property tax system remains stable, but federal tax law now caps the deduction for state and local taxes (SALT) at $15,000 per year for married couples filing jointly. This cap applies to property taxes, income taxes, and sales taxes combined.

For rental property owners in Encinitas, this means you cannot deduct all your property taxes on your personal return if you own multiple properties or have high property tax bills.

Example:

If your total SALT payments are $25,000, only $15,000 is deductible on your federal return. However, rental property owners can still deduct property taxes as a business expense on Schedule E, which is separate from the SALT cap.

Tip:

Keep detailed records of property taxes paid on rental properties and separate them from personal property taxes. This distinction helps maximize your tax optimization for rental property owners.

3. Increased Standard Mileage Rate for Rental Property Travel

Travel expenses related to managing rental properties remain deductible, but the IRS has increased the standard mileage rate to 65.5 cents per mile in 2026. This increase reflects higher fuel and vehicle maintenance costs.

Example:

If you drive 1,000 miles annually to visit your Encinitas rental properties, you can now deduct $655 instead of the previous $620.

Tip:

Maintain a mileage log with dates, destinations, and purpose of trips. This documentation supports your deductions and improves your tax optimization for rental property owners.

4. Expanded Energy Efficiency Credits for Rental Properties

The Inflation Reduction Act has expanded energy efficiency tax credits for residential rental properties. Starting in 2026, landlords who invest in solar panels, energy-efficient windows, or heat pumps can claim up to 30% of the installation cost as a tax credit.

Example:

Installing a $20,000 solar panel system on your Encinitas rental property could yield a $6,000 tax credit, directly reducing your tax bill.

Tip:

Plan upgrades carefully and consult with a tax professional to ensure your improvements qualify. These credits can significantly reduce your tax burden and increase your property’s appeal to eco-conscious tenants.

5. New Reporting Requirements for Short-Term Rentals

Encinitas and surrounding areas have seen a rise in short-term rentals. The IRS now requires more detailed reporting for rental income from properties rented fewer than 15 days per year or listed on platforms like Airbnb.

You must report gross rental income and expenses separately and keep detailed records of rental days versus personal use days. Failure to comply can lead to penalties.

Example:

If you rent your Encinitas beach cottage for 10 days a year, you must report the income but may not deduct expenses beyond the rental days.

Tip:

Use property management software or spreadsheets to track rental activity. Accurate records support compliance and help with tax optimization for rental property owners.

Rental property owners in Encinitas and nearby areas face important tax changes in 2026 that can affect their bottom line. By understanding these updates, you can better manage your properties and reduce your tax burden. Focus on depreciation adjustments, property tax deductions, travel expense tracking, energy credits, and short-term rental reporting to stay ahead.