Rents are up in Germantown, MD, and vacancy rates remain low. Are your investment properties bringing in as much as they should be?
Improving your rental property accounting can help you increase revenue and lower expenses. You can track your income and expenses more accurately. Better accounting practices can also help you avoid an IRS audit.
Learn more about how to improve your real estate accounting in this landlord accounting guide.
Keep Your Business and Personal Finances Separate
Having separate accounts for your personal and business finances is essential. Put all the income from your rental property into the business account and pay the expenses from there as well. Keeping your rental property accounting separate helps prevent the IRS from looking into your personal finances in the event of an audit.
You can track your business finances more easily. If you have multiple properties, you may want to set up separate accounts for each property. Finding the income, expenses, and other data for each property is simpler.
Accurately Track Income and Expenses
You need a reliable way to track the income and expenses for each of your properties. Over- or under-reporting either of these categories can lead to trouble with the IRS. Try to set up your tracking to match what you'll need to report on your taxes.
Types of Real Estate Income
Rent is the most obvious source of income from your investment properties. Other types of income include:
- Application fees
- Late fees
- Pet rent
- Utility reimbursements
If you use a security deposit to repair damage to the property, the amount of the deposit you used is considered income. Good rental income management will help you accurately report all of your real estate income.
Types of Real Estate Expenses
Property expense tracking covers a wide range of costs, such as:
- Maintenance and repairs
- Vendor payments for services like landscaping
- Utilities
- Property taxes and insurance
- Mortgage payments, including interest
- Advertising and marketing
Regularly comparing your income to expenses is essential for understanding how profitable a property is.
Prepare for Tax Season
Property owners have several tax forms to master.
All of your expenses and income go onto Form 1040 Schedule E. Schedule E has several expense categories. Keeping these categories in mind when you're setting up your property expense reporting will make filing your taxes easier.
All of your employees must fill out a W-9, and you'll give them a W-2 at the end of the calendar year.
Contractors who do work for your property should also give you a W-9. If you paid a contractor at least $600 in the calendar year, you'll need to give them a 1099.
Get Help with Your Rental Property Accounting
Good rental property accounting requires accurate tracking and reporting. It helps you comply with tax regulations. It helps you find ways to make your properties more profitable.
Getting help from an expert can help you avoid problems and get more from your real estate investments. PMI Milestone can help with your accounting and reporting. Our professional team provides accurate, comprehensive financial reporting for your Germantown, MD properties.
Schedule a consultation with PMI Milestone today to learn how our accounting team can help you maximize your income and minimize your expenses.
