If you are new to renting out investment property, you may be a master at maintaining and improving your property but still learning the ropes when it comes to the money management side. Whether seasonally or year-round, keeping track of your income and expenses throughout the calendar year will provide a convenient and accurate financial snapshot.
One helpful tip when completing your Schedule E is to track any expenses paid by your tenant, such as plumbing repairs, general repairs, etc. If your tenant covers the cost of any unforeseen repairs and deducts this cost from a rent payment, be sure to obtain the receipt and record this cost as an expense (deduction) on your return.
Secondly, keep an eye on any funds held in escrow. Security deposits are not reported as income unless the funds are not returned to the tenant upon termination of the lease or kept due to a violation of the lease prior to the end of the term.
Lastly, regardless of the period covered for which you receive rental payments in advance, all funds received in the current tax year for a future calendar year must be reported on your annual tax return as income. This includes last month’s rent.
As with any business venture, it pays to keep the bookkeeping meticulous. Come tax season, you’ll be well-prepared to file a prompt return.
Please refer to the following link for more helpful real estate tax tips:
Sharon M. Simeone 