Rental Property Tax Deductions for Property Managers & Landlords

Rental Property Tax Deductions for Property Managers & Landlords

Tracking Income and Expenses for Oakland Property Management

Making a profit is the goal of almost every single landlord or rental property owner, but unfortunately, many of them are not keeping enough records to ensure that they are actually earning a return on their investments.
 

It may seem like a profit is rolling in each month when tenants pay their rent and you deposit that check into your bank account, but do you ever stop to think about expenses like maintenance and utilities?
 

Tracking rental property income and expenses with good record keeping is actually easier than it sounds, and it’s the best thing to do for your bottom line. It’s also essential for other important situations, such as filing taxes.
 

Of course, you can always do it yourself — you just need to make or download a spreadsheet, or it’s one of the tasks you can hire an Oakland property manager to help you.
 

Expenses & Net Operating Income: What You Need to Know First

Knowing the figures for your actual net operating income (NOI) means understanding the equation that goes into finding that total. Luckily, there isn’t much to that basic equation.
 

You simply subtract monthly or annual operating expenses (maintenance, property management services, utilities, etc.) from the total income you receive from the rental property (the amount of rent your tenant or combination of tenants pay each month or year, as well as late fees).
 

Again, an Oakland property management company can help you keep these records or take on other duties so that you have more time to spend on tracking these expenses.
 

What Kind of Expenses Can You Deduct as a Property Manager or Landlord?

One thing that often confuses many landlords and rental property owners is what to include in the expense columns on their spreadsheets or property management accounting software. The short answer is any expense you have related to your rental property. Let’s take a look at some of the most common ones, though you may have others that aren’t listed.
 

1. Rental property insurance – How much of a premium do you pay each year to protect your property?
 

2. Utilities – Some tenants pay all of their utilities. Some landlords pay all the utilities and include them in the monthly rent. Some landlords will pay specific monthly utilities, such as the water or power bill. Include whatever your share of the utility bills is.
 

3. Property taxes – How much do you pay your municipality each year in property taxes? Include any late fees if applicable.
 

4. Personal travel fees – Chances are you don’t live on your rental property, so that means taking time to visit it often for everything from routine maintenance to showing it to potential tenants to making emergency visits for evictions and repairs. If you do not rely on Oakland property management to handle these tasks for you, you’ll need to deduct the amount of gas and mileage you spend.
 

5. Marketing fees – There are many free options for marketing a rental property these days, but throwing a sign in the yard or posting the listing on social media isn’t always enough to land a tenant. Many landlords leave this task to their Oakland property management company, but many others pay for subscription services, billboards, listing fees, and more in order to advertise their property. Any money spent should be a part of your deducted expenses.
 

6. Property cleanup – Every time a tenant moves out of your rental property, there is bound to be some cleanup required. Whether you simply need to throw a fresh coat of paint on the walls or rip up and replace the carpet, the cost of the supplies and/or services should be deducted from your rental property income.
 

7. Maintenance – Every rental property also requires maintenance at some point in time. This might include cleaning the pool, mowing the lawn, replacing batteries in the smoke detectors, or keeping up with the landscaping each season. Whether you do it yourself, hire someone, or work with property management in California, it’s important to include the cost on your spreadsheet.
 

8. Emergencies and repairs – It’s the thing all landlords and property owners dread: the 2 a.m. call from a tenant with the busted pipe in the bathroom. Then there is the refrigerator that stops working, the washing machine that floods, the drain that stays clogged, or the tree that fell during a particularly bad storm. Again, whether you do it yourself, work with Oakland property management, or hire a third party to handle emergencies and repairs, all of the expenses should be included.
 

9. Legal fees – Did you hire an attorney to help draw up a lease? Did you have to evict a tenant and use a lawyer to help you understand the legal ramifications? Did a tenant attempt to sue you? Anytime you incur legal fees, you need to deduct them.
 

10. HOA fees – If your house or other type of rental property is located in a community that requires HOA or other service fees, you’ll want to include them on your itemized list, as well.
 

11. Other expenses – Every situation is unique, and no two landlords will have the same expenses. You may have income taxes, debt services, commission, Oakland property management fees, office supplies, depreciation, tenant improvements, and much more.

Tips for Tracking Income and Expenses as a Property Manager or Landlord

With so much information to track, it can feel somewhat confusing, especially if you are new to the job. If you are attempting to do it yourself without the help of Oakland property management, these tips might help:
 

1. Keep up with your receipts. Whether you bought a bottle of cleaning fluid, replaced the roof, or hired a company to come mow the lawn at your rental property every week, save every single receipt related to the property. Not only do they help you keep good records, but you may need them for tax purposes.
 

2. Type, save, and back up your records. Keeping track of your records with a spreadsheet program like Excel or even software made specifically for the real estate or rental industries is generally the best way to go when it comes to accuracy. Be sure you save and back up any files you create so that you can access them easily and at any time.
 

3. Break it up by month. You can and should keep annual records, but the more properties you own and the more expenses you have, the more complicated that becomes. It’s generally easier to break your spreadsheet up by month first.
 

4. Double check everything. When tax time rolls around and you are looking for deductions, you’ll be glad you did, especially if you ever get audited. You’ll also appreciate the accurate records if you ever decide to work with an accountant.
 

5. Use your records to look for ways to make extra income or cut back on expenses. You may not realize that you are spending so much to pay a company to mow the lawn at the rental property until you take a look at the totals for the year. Would it be cheaper to do it yourself or even let the tenant do it? Are you driving too many miles each month to handle repairs? Maybe you want to consider looking for property management in California to help take on some of the responsibilities?

What to Do When the Property Management & Accounting Gets Overwhelming

Not every landlord or rental property owner is capable of keeping up with his or her income and expenses. This is especially true for those who own multiple properties, those who are busy with other endeavors, or those who simply just don’t enjoy this aspect of the job.
 

Luckily, you can choose property management services to handle it for you instead. A property manager can handle all aspects of your rental or just the ones you don’t want to deal with. That includes tracking income and expenses on a regular basis.
 

Depending on what you want your property manager to do, he or she can keep up with all of the financial aspects of managing your property. The two of you will meet or communicate regularly to discuss the numbers and make any changes as necessary.
 

But that’s not all a property manager can do for you. He or she can advertise your rental property, help you screen tenants, handle rent collection, take care of evictions, answer those emergency calls, handle maintenance, perform inspections, guide you through legal matters, prepare the property for tenants, help draw up a lease and other paperwork, and much much more. Instead of focusing every little expense, you can even consolidate some of them by hiring a property manager.
 

Disclaimer: The information is not intended to replace the guidance of a tax attorney. This article is provided for general informational purposes only and should not be construed as legal advice from Prime Property Group, Inc. or the Author of this article. You should seek legal advice from your tax attorney or CPA for more information.

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