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Rental Property Accounting: How to Handle Maintenance Expenses

Rental Property Accounting: How to Handle Maintenance Expenses

Tax season is here and it is time for landlords to start adding up those maintenance expenses. There are nearly 105,000 rental households in Cleveland, OH.

All of them are incurring maintenance costs that are tax deductible. By deducting these costs, landlords lower their tax liability and keep a higher share of their rental income.

A property management company can keep detailed accounting records for you. Read on to learn more about rental property accounting. Explore how the pros handle maintenance expenses each tax season.

Why Is It Important to Keep Track of Maintenance Expenses?

There are many reasons why you need to meticulously track maintenance costs. For practical purposes, landlords need to know how much to put aside in their maintenance fund each year. Landlords also want to know how much income they are bringing in.

Maintenance expenses are also qualified tax deductions for your yearly filing. You can add up costs over the course of a year and subtract them from your taxable income. This will lower your tax liability and lead to a more favorable return.

What Kind of Maintenance Costs Are There?

Property maintenance costs add up and can become convoluted. There are routine maintenance charges such as lawn service and swimming pool treatment. These occur on a recurring basis and are easier to track and budget for.

Many wise landlords and property managers emphasize preventative maintenance. They want to extend the service life of expensive systems like the air conditioner or refrigerators. They bring a technician once or twice a year to service these units.

Lastly, there is unscheduled maintenance. These are unexpected costs that arise over the course of the year. For example, let's say the roof starts leaking and you need a professional to come in and add a new layer of shingles.

How to Handle Maintenance Costs

Clearly, there are many maintenance costs to keep track of. It is not efficient to stockpile a bunch of paper receipts or e-mails.

Instead, a property management company uses accounting software to log each transaction. They can upload digital copies of the invoices to substantiate the expenses.

At the end of the year, your property manager can run a report with a detailed summary of all maintenance expenses. You can then give this to your accountant for tax deductions.

These reports will also help you budget for maintenance. As a landlord, you will set up a maintenance fund for your property manager to use to pay for these expenses. You can replenish this fund each year using the data from the maintenance reports.

Your Guide to Rental Property Accounting

You are now ready to start optimizing your accounting records. Maintenance expenses represent a significant tax deduction for property owners. You want accurate reporting on your taxes and also to fight back against any IRS tax audits.

Remax Haven Realty has the experience and resources to help landlords handle their expenses. If you need help with rental property accounting, contact us at Remax Haven Realty to speak with an expert.