While owning a rental property can be a terrific way to bring in income, those extra dollars can make things complicated when it comes to preparing a tax return.
Fortunately for the 15 million people who own rental properties
in the U.S., there are ways to make tax season a little more
• Store your receipts, bills and statements during the year.
This will make it much easier to locate and organize them at tax time. Create an
envelope or folder for each property, and put all of your receipts in there
during the year. Do the same for regular bills such as the mortgage, property
taxes, insurance, utilities, etc.
• Keep good rental payment records. You
probably get a lot of checks-and even cash-from your tenants during the year. It
can be really hard to figure out at tax time if you don’t stay organized during
• Know what property each check comes from. You can record this
with your bank deposits in your checkbook or a spreadsheet or rental property
• Use rental property software like Quicken Rental Property
Manager 2.0, designed for people who own up to 10 properties and 25 total units.
It makes it easier to file taxes and manage rental property income and expenses.
This can help eliminate hours at the end of the year preparing for that Schedule
E. Using the software, you can simply print the tax report and transfer the data
to the form, give it to your accountant, or export data directly to tax
preparation software like TurboTax.
• Separate security deposits from
rent payments. Security deposits are not considered income if you intend to
return them to the tenant, so make sure these deposits are separated from rent
• Flag expense receipts. Some expenses are hard to classify
properly for the IRS. When you replace the faucet in the bathroom, is that
considered a repair or a capital improvement? It makes a big difference to Uncle
Sam because 100 percent of repairs can be deducted this year, but capital
improvements must be deducted over time. When you’re not sure, flag those
receipts so you can later discuss them with your accountant. Keep them in a
separate place or flag them in your expense journal.
• Lastly, don’t
forget the mileage deduction. You probably rack up a lot of miles driving to and
from your properties and those trips to the hardware store. It can be tedious to
keep track of the mileage, but it really pays off since the IRS allows you to
deduct about 45 cents/mile. To make it easier, use an Internet map ser-vice such
as MapQuest to look up the mileage for common trips-like between your home and each property.
~Horsley's Property Management
- Horsley's Real Estate, LLC
- Horsley's Property Management is a Real Estate Investment Company located in Maryland, that provides real estate services, including but not limited to assisting homeowners with finding tenants for their vacant units, assisting individuals with finding a rental unit, professional property management services, some education along with a host of other services. We give our exclusive attention to each individual while focusing on a plan that could help solve your problem. We do not offer legal advice. Please contact a attorney. Here at Horsley’s Real Estate, LLC we work as a team to ensure we get the best possible solution.