With good record-keeping practice, landlords can greatly reduce taxable income due to getting deductions for rental activities. ManageCasa takes you through exactly what records a landlord needs.
Records to Keep:
For local landlords who don’t have a separate business entity nor employees, you need two types of records for tax purposes which are 1.) a record of your rental income and expenses, 2.) supporting documents for your income and expenses. You need records of income and expenses for each property you rent out, like a scanned check, for example, in your IRS Schedule E tax return. Additionally, keep property-specific physical receipts, credit card records, anything with a paper trail that shows a transaction in the event of an IRS audit; if this does happen, you can show your claimed expenses for every property reported in your tax returns are genuine.
Although handwritten ledgers and accounting books are still in use, using an electronic tool or software will save you time and effort. A few ideas on record-keeping tools:
Microsoft Excel or Google Spreadsheets are simple, effective programs to use for keeping track of income (rent, etc.) and expenses (maintenance, insurance, etc.) You can use a new spreadsheet for each property, or have all income and expenses-related items in one spreadsheet with multiple tabs.
2. Personal Finance Software
Personal finance programs and software such as Microsoft Money or Quicken are a grade up from Spreadsheets since these programs work off of a electronic checkbook, and tabulations and allocations for income and expenses can be automatic. Personal finance softwares will be faster and possibly easier to use than manual spreadsheets, but often require a software purchase or sign-up fee.
3. Accounting Software
On the market, you can find business accounting software such as Quickbooks or AccountEdge. However, they tend to have too many features for local landlords, as well as accounting terminology that may make the software difficult to navigate through.
4. Property Management Software
We would like to recommend to all serious, local landlords, using a Property Management Software. ManageCasa is currently offered FREE. Not only does ManageCasa property management software help you with accounting, other features include: automatically sending photos as scans into your account for future reference, sending you updates for rent and bill due dates, amongst many more! Check out ManageCasa.com to learn more and sign up today!