As a landlord, you’ll be lost (even with an accountant) if you aren’t tracking your rental property expenses correctly. Keeping detailed expense records will not only help you feel more organized but it will also make filing your taxes easier, allow you to see more opportunities for deductions, and understand the return on each of your rental investments.
In this article, we’ll explain:
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Why You Should Have Detailed Rental Property Expenses
While it might seem like common sense to track your rental property expenses as part of the rental management process, there are additional benefits to consider. You should maintain detailed rental property expenses to:
- Maximize your tax deductions. This might be the best reason to carefully keep track of your rental expenses. Doing so makes filing taxes easier and more accurate, and ensures that you don’t miss out on any deductions. Learn more about rental property tax deductions in our online tax course.
- Be prepared for IRS audits. While we don’t wish this upon you, it’s well-known that the IRS audits many companies every year. If there are any discrepancies on your tax return, having your tracked rental expenses as proof to back up your claim will come in handy.
- Calculate the NOI on your properties. The Net Operating Income (NOI) is the calculation you use to analyze the profitability of your rental investment properties. The NOI is calculated by subtracting all of your expenses from your total revenue, which helps you understand how much you’re spending for each property, and how it’s impacting the ROI of your property.
Your future self (and CPA) will thank you for accurately keeping track of your rental property expenses so you can avoid the headache of going back in time to calculate gas money or find receipts.
Ways to Track Rental Property Expenses
There are really only two ways to track your rental property expenses: manually or with the help of online tools.
Keeping track of your rental property expenses manually used to be the only way to do it. When we say manually, we mean creating your own spreadsheets on Excel or Google Sheets, or even doing it by hand with a worksheet. Along with writing in expenses manually, you also have to keep receipts organized in a folder online, which may require scanning them, or in a physical file somewhere. Keeping track of expenses manually can become stressful and not to mention extremely time-consuming – luckily, in the age of virtual landlords, there are other options out there.
The alternative to tracking your rental expenses manually is to use an online tool like TurboTenant. Online expense tracking tools were built to be fast, secure, and help you prepare for tax season. Your hand won’t cramp from writing in expenses, and you won’t have to worry about stapling receipts anywhere. Plus, if you manage other aspects of your property online like tenant screening or rent payments, tracking your expenses in the same place will be convenient.
What You Should Keep Track Of
When it comes to what you should be keeping track of, it comes back to the Schedule E Form. This form is used to report income or loss from rental real estate. For expenses to be deducted, they must be tied to a rental property as you file a Schedule E form for each property you own.
Here are some of the categories listed on the Schedule E you should be tracking:
- Advertising – All your marketing costs (including for rent yard signs, advertising on certain websites, or sending out mailers) fall into this category.
- Auto and Travel – Driving, along with other necessary and ordinary auto and travel costs needed to maintain your rentals, would qualify in this category.
- Cleaning and Maintenance – This section includes all the cleaning expenses incurred after a tenant moves out as well as common maintenance expenses like yard work, painting, and other upkeep or maintenance requests you tend to.
- Commissions – This refers to the real estate agent or property management commissions you paid to help find a tenant. If you use free online rental property marketing, you’ll have less to add in this section!
- Insurance – You should have landlord insurance along with any other policies your unique rentals require, like hazard or flood policies. Remember that this is the amount you actually paid to your insurance company (not what you pay in escrow).
- Management Fees – If you have a property manager or agent helping manage the property, their 8-12% of your monthly rental income charge would be included in this category.
- Legal and Professional Fees – Any expenses related to accounting, attorney fees, or other business costs related to your tenants qualify for this category.
- Utilities – This includes utility expenses you have incurred, even if your tenant reimbursed you for them. Do not include utilities that the tenant has paid for solely themselves.
- Taxes – All of the tax expenses you have accrued from owning and operating your rental property such as property taxes, land taxes, school district taxes, or special easements can be included in this category. This does not include income taxes.
- Repairs – Tracking repairs made to the property that were not considered “capital improvements” would be in this category. For example, small repairs like fixing a broken window is a repair – not large renovations like replacing floors or the roof, which would have to be taken as deductions over time.
The above is not an exhaustive list of everything you should track as there is more on the Schedule E form, plus you may want to track additional expenses not listed on the form.
Another thing to consider is how often you should be tracking expenses. Ideally, you should always be tracking your rental expenses as they occur, however, choose a cadence that works best for you whether it’s as you go or monthly. Tracking your expenses monthly when you are also tracking your online rent payments is a great way to start.
How to Track Rental Expenses in TurboTenant
If you are ready to make the move to tracking your rental expenses online, you can easily do so in your TurboTenant account. Below we’ll walk you through how to start tracking expenses:
Locate the expenses tab in your dashboard – it will be on the bottom left-hand side under Financial. To record an expense, click add new and then record expense.
You will then input information related to the expense including the date it was paid, the amount, the associated property, and the associated category (corresponding to the Schedule E Form). You will also be able to add receipts or any other important documents for each expense.
In the expense table, you can edit expenses, delete expenses, and you can even filter by categories, property, or date ranges.
Exporting Your Rental Property Expenses
Now that you have all of your rental property expenses categorized correctly in TurboTenant, you can export the expenses you tracked to give them to your CPA or upload them to any financial software you use.
All you have to do is click the export button in the top right-hand corner and a CSV will be downloaded. Whether you want to export weekly or monthly, you can upload the CSV to the bookkeeping software of your choice.
Alternatively, you could leverage REI Hub through TurboTenant. For a low monthly charge, REI Hub allows you to transfer all your TurboTenant expense tracking information and streamline your financial reporting in mere clicks.
Long gone are the days of digging for receipts and scrambling to find the right documents for your rentals when tax season rolls around. Tracking your rental expenses in TurboTenant allows you to manage all aspects of your business in one place so you can maximize your tax deductions and increase the ROI on your rental investment.
FAQ on Tracking Rental Expenses
What are typical rental property expenses?
When you own and manage a rental property, there are several types of expenses that you will incur. You’ll have expenses related to your business such as legal and property management fees, and also expenses related to the property itself like maintenance and utilities.
What rental expenses can I deduct?
To find out the category and type of rental expenses you can deduct, reference the Schedule E Form from the IRS.
Is it free to use TurboTenant’s expense tracking feature?
Yes, it is completely free to use TurboTenant’s expense tracking feature. You can also take advantage of automatic expense tracking (and rent payments) with our integrated accounting tool. See here for a full list of features TurboTenant offers.