Accounting, Property Management

Rental Property Tax Resource Guide for Landlords

rental property tax

As a landlord, filing your rental property tax can be daunting. As deadlines approach and it’s time to prepare your forms, you may have several questions on your mind. Taxes can be a complicated business, particularly for new landlords. In the flurry of activity around getting your property ready to rent, selecting a renter, and planning what you’ll do with your expected new income, it’s all too easy to forget about tax preparation and strategy.

internal link Related: Rental Property Taxes: 8 Tax Tips for Landlords

In this article, we feature resources prepared by some of our partners, and assemble a list of tools that will help you through the process of preparing your taxes.

From Rentec Direct: Understanding Rental Income & Deductions

Landlords with rental real estate can deduct certain expenses from their property’s income. This article by Rentec Direct clearly explains what rental income is. It provides tax tips from the Internal Revenue Service (IRS) for property owners reporting rental income.

It also shares a long list of important tax deductions that landlords can benefit from. These include home office, mileage, utilities, travel costs, and more. This quick guide to income and expenses for rental investors will come in handy when calculating your rental property tax.

About Rentec Direct:

Rentec Direct is a comprehensive property management tool for landlords who self-manage, property managers, companies, and owners. All of their plans include financial tracking and reporting features. You can record all the transactions you’ve made that are related to your rental property. Plus, it syncs your financial information quickly with QuickBooks. Moreover, you can electronically file all your 1099 MISC forms.

internal link Related: What is a 1099 Tax Form For? 1099 Requirements for Landlords

  • Designed to address the needs of DIY landlords as well as property management companies, Rentec Direct includes all the tools necessary to manage and rent your properties
  • Strength: Complete Solution

From Landlord Studio: Understanding Net Operating Expenses & Net Operating Income

Often landlords find it challenging to understand what counts as an operating expense and what does not. This article helps you correctly calculate operating expenses. It defines which types of expenses you should include. For instance, marketing and advertising costs are often a big operating expense facing landlords. If you are running advertisements to attract renters, you can deduct those expenses.

In another article, Landlord Studio explains the key differences between operating and capital expenses. In a nutshell, operating expenses impact a given year’s taxes. Whereas, capital expenses are for more permanent improvements, depreciating over time. Understanding operating expenses and what’s deductible vs what’s depreciable will help you in accurately preparing your rental property tax documents.

When talking about operating expenses, you should also understand what net operating income (NOI) is. It’s essentially the revenue you generate from the day-to-day operations of the property, minus net operating expenses. NOI helps you analyze the profitability of your income-generating real estate investments. If you need help with calculating your NOI, we have a calculator on our website that will help you input expenses and income in order to compute your net operating income.

About Landlord Studio:

Landlord Studio is a property management tool that focuses on bookkeeping and accounting for landlords. You can have all the financial information you need in one convenient place when it’s time to file your taxes. With this powerful platform, you can track and create income vs. expense reports. You can also organize reports by property for unit-level expense tracking. This can help you distinguish the most profitable units from those that are actually costing you money. You can also create professional schedule-E reports for your taxes. Another valuable feature is that the platform lets you link your properties to multiple bank accounts.

  • Accounting and property management tools to save time and money while managing your rentals. Track income and expenses, screen tenants, collect rent, and more.
  • Strength: Accounting and Financial Tracking

From RentRedi: Choosing the Best Rental Property Tax Tools

This article by RentRedi illustrates how a commonly used record-keeping tool, the good old spreadsheet, stacks up against a rental property tax tool such as the one they offer.  It compares REI Hub, who they partner with on their finance tools, with rental spreadsheets. The article takes a close look at the pros and cons of each option to help landlords decide which is the most suitable tool for them.

In another article, RentRedi compares REI Hub with Quickbooks Online. Although QuickBooks Online is a popular accounting tool, it doesn’t offer features suitable for managing rental properties. On the other hand, REI Hub offers specialized features that help real estate investors and landlords specifically manage their books.

About RentRedi:

RentRedi is a robust property management tool for landlords. It provides comprehensive bookkeeping, reporting, and accounting features through its partnership with REIHub.net. One of the main strengths of this tool is that it has a convenient user-friendly app that is great for both landlords and tenants.

RentRedi has an easy-to-read dashboard and offers one-click Schedule E reports. Additionally, you can quickly export rental payment history for one or all of your units to QuickBooks Online, Desktop, Pro, or to spreadsheets. You get an overview of all transactions in one spot and prepare better ahead of tax season.

  • RentRedi is an all-inclusive landlord-tenant app. Manage vacancies, screening, and rent collection from wherever you are, on any device.
  • Strength: Complete Solution

From Stessa: Rental Property Tax Strategies & Tools

In Stessa’s 2022 Tax Guide, you will explore important tax-saving strategies as well as the basics of tax filings. It covers a wide range of topics relevant for landlords including deductions, depreciation, capital improvements vs. repairs and maintenance expenses, and much more.

Created in partnership with a real estate-focused CPA, Stessa’s Tax Checklist is another useful tool that helps you track tax return deadlines and quarterly tax due dates. Stessa’s team has expertly curated this tax checklist and key date tracker with every form required for 2022 tax filing.

About Stessa:

If you’re looking to read further about tax deductions, you may want to check out Stessa’s 10 Top Deductions Guide. It covers key tax deductions for rental property owners. Some of the deductions discussed include depreciation expense, transportation and mileage, maintenance and repairs, employees and independent contractors, and more. You can read more about these deductions in our blog post here.

Stessa is an asset management and accounting software for landlords and real estate investors. It offers powerful features such as smart money management, automated financial tracking, personalized reporting, and more. It securely syncs with the bank and financial accounts associated with your rental property. The platform automatically tracks your transactions once you link the accounts. It also organizes them into user-friendly reports of assets and liabilities, income and expenses, and more.

Another key benefit of Stessa is its receipt scanning feature. With the mobile version of Stessa, you can use your device’s camera to take a snapshot of the receipt. The tool will immediately upload it for processing, saving you from the hassle of managing tons of paper receipts at tax time.

  • Asset management and accounting software for real estate investors, including smart money management, automated income and expense tracking, personalized reporting and more.
  • Strength: Accounting and Financial Tracking

Takeaway

We understand that taxes can be confusing and overwhelming, especially for landlords that are filing their rental property taxes for the first time. As a result, we’ve tried to provide a list of resources and tools that will help you with the most common questions and issues regarding taxes. 

Our partners who created these resources have particular strength in rental property accounting and tax preparation. Therefore, as you proceed with tax preparation, we encourage you to go through these resources. This will help you file your taxes easily and correctly, without paying a lot of money. So, we encourage you to visit their websites and explore the services they provide. However, keep in mind that we are not tax specialists ourselves. Therefore, we recommend consulting a tax professional if you are unclear on anything that comes up.

internal link Related: Reporting and Accounting Tools: Best Accounting Software for Landlords

Disclosure: Some of the links in this post are affiliate links and Landlord Gurus may earn a commission. Our mission remains to provide valuable resources and information that helps landlords manage their rental properties efficiently and profitably. We link to these companies and their products because of their quality, not because of the commission.

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About Chris Lee

Chris comes from a family of real estate investors, and remembers well his childhood of helping to prepare apartments between renters. He now manages his own property, apartment complexes, and condos. He has particular insight into the issues around short-term rentals as he manages those for himself and for other owners.
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