In our past blogs, we’ve talked about some of the tax deductions you can get as a landlord. But guess what? None of those tax deductions matter if you don’t have the records to claim them.
Bookkeeping is one of the most important things you’ll do as a landlord, so it’s important to do it right. Especially as you continue investing in rental property, you’ll discover that your bookkeeping requirements get more and more complex.
To keep your finances straight, and make sure you don’t lose any money, we’re going to talk about a few bookkeeping principles that you need to harness in order to keep your accounts in tip-top shape.
Records YOU HAVE to Have
If you’re like many small landlords, you probably haven’t filed to create a separate business entity to manage your properties under. So, that means there are only two basic types of records you’ll need come tax season:
- Rental income and expense records
- All the supporting documents for your income and expenses
Your income and expense record will help you determine whether or not you made a taxable profit or got hit with a deductible loss. Once you get the records, you can summarize the income and expenses on the Schedule E tax form.
All the supporting documents will serve as proof that your expenses are genuine. Items like cancelled checks, credit card records, and receipts will help you prove your deductions are legitimate if you get audited by the IRS.
Rental Property Management Software
As you invest in more properties, the traditional Excel spreadsheet or paper accounting system may become burdensome. In that case, a rental management software might be the best solution. Rental management software will expedite the accounting process. It can automatically track and input expenditures and income and generate profit and loss statements. You and your accountant can easily track your finanmcial situation and make any needed adjustments.
Whatever you do, don’t divert time or money away from bookkeeping. It’s one of the most important aspects to manaing your rental properties, and if your books are in order, you’l have a lot fewer headaches come tax season.
Are you interested in learning more about income tax services in Washington DC or another location? We offer accounting services for the local Washington DC area, as well as virtual services that are available for people anywhere in the United States. Contact us to learn more: (202) 789-8898