Efficiently recording rental income and expenses is best tackled with an efficient system. First, a separate record is required for each property. A landlord should account for rent received and expenses paid when they occur. A delay only complicates matters, as paperwork is misplaced and memory fades. The reporting of rental income and expenses occurs only once per year on a tax return. However, assembling data on the correct tax schedule is significantly simplified by maintaining rental income records throughout the year.
Create a separate ledger for each rental property by recording descriptions across the top of pages.
Record the gross rent paid by a tenant in a column labeled “rental income.” Exclude security deposits from rental income. Record rent as income when it’s actually paid, not simply when it’s due.
List any fee deducted by a property manager from collected rent in a column labeled “Management Fee.”
Label the next columns for categories of rental expense, such as insurance, utilities, advertising, homeowners’ association dues, maintenance, repairs and property taxes. Ignore mortgage payments. Interest on a mortgage is a deductible expense, and the lender will report it to you in time for you to prepare your tax returns.
Record expenses as they are paid in the appropriate columns for the expense categories.
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