Connect with us


What You Need to Know About Tracking Rental Property Expenses



Rental Property Expenses

Tracking your rental property expenses not only gives you clarity into the health and profits of your business, but it’s also crucial for protecting yourself in the case of an IRS audit. As a landlord, you should track all your rental expenses, including maintenance costs, utility expenses like electricity, pest control, advertising fees, and others. Below are some tips for tracking your expenses like a pro.

Organize Your Essential Documents

There is a list of documents that you need to have readily available for reference purposes when tracking your rental property expenses. These documents have vital information that your tax professional or potentially the IRS will need to reference.

For instance, make sure that you have leases from past and current tenants that date back several years. Any legal documents, court hearings, or evictions notices and fines should also be kept safe, along with copies of all communication with your tenants. You should also keep all property deeds, receipts for things like labor and materials, invoices for services, and utility bills.

Other important documents to keep handy include insurance policies, mortgage information, and your federal and state tax returns for the past five years.

Track Deductible Expenses

In addition to tracking rental property expenses, you should also keep track of the expenses that you can write off in tax deductions. An expense must be considered an operating expense to be fully deductible in one year. Operating expenses are ongoing, everyday business expenses. To qualify for immediate deduction, they must be ordinary and necessary, current, directly related to your rental activity, and reasonable in amount.

You can write off legal and accounting fees, advertising and office expenses, maintenance and repair costs, and if you employ workers that receive a salary, you should make sure that you track their payments, taxes withheld, and any benefits you pay out to them. Each of these are deductible operating expenses.

Be Prepared for IRS Audits

It’s common to hear about real estate investors getting audited by the IRS for shady write offs or unclear tax filings. Although it’s tempting to write off anything you think may possibly be deductible, it’s more important that you don’t break the law.

When checking for audits, the IRS mainly looks at four major categories of rental property expenses.

Meals and Entertainment

When writing off expenses for meals and entertainment, it’s best to create a policy that you and your employees can easily remember and follow. A good rule of thumb is to only reimburse meals and entertainment if the business conducted happened before, during, or after the meal. If you have a concrete policy that is written down and followed, it looks much better if the IRS decides to audit you.

Also, as with all deductions, make sure you have clear documentation proving that it is in fact a business expense.

Substantial and Vague Expenses

If you have large expenses that are not specifically categorized, the IRS may take a closer look and could choose to audit you in order to investigate further. Sometimes taxpayers take liberties with deductions by writing off expenses under vague names like “administrative expenses” or “other expenses”.

You should try and give as much explanation as you can and break down your expenses into smaller, more descriptive chunks. For example, instead of writing off $4,000 of “other expenses”, you can break it into $2,000 for continuing education, $1,000 for phone, and $1,000 for technology and software.

Donating to Charity

The IRS expects you to be able to donate around 3-5% of your annual income to charity. If you claim donations as much more than that, the IRS may start paying closer attention to your business’ finances and deductions.

If you choose to donate to charity, especially if you donate a substantial amount each year, make sure you keep detailed records to prove that the money is going where you say it is.

Travel Expenses

One of the perks of being a landlord is being able to deduct out-of-town travel expenses. You can deduct things like lodging, gas, and parking fees when you’re travelling for business. However, don’t abuse this privilege. Deducting five-star hotels, first-class flights, or other gratuitous expenses can lead to an audit. Make sure you’re keeping receipts and other evidence that your travel expenses are for business and not leisure or a vacation.


The best way to track your rental property expenses is through property management software like Innago. When you choose software that works best for you and your business, you can gather data, pull reports, and analyze your expense reports without worrying about silly mistakes or inconsistencies. Automating your record tracking is a great way to save time and money. Do yourself a favor and track your rental expenses digitally.

Continue Reading

Recent News

Jack Martin and Lili Reinhart Jack Martin and Lili Reinhart
Celebrity10 hours ago

Who Is Jack Martin? All About Lili Reinhart’s Boyfriend

Lili Reinhart has been our beloved since starring in the famous show ‘Riverdale’. The end of the show marks an...

Daniel Radcliffe and Erin Darke Daniel Radcliffe and Erin Darke
Celebrity10 hours ago

Who Is Erin Darke? Everything To Know About Daniel Radcliffe’s Longtime Girlfriend

We all are a little curious to know about Daniel Radcliffe’s longtime girlfriend Erin Darke. We are really glad to...

Lana Del Rey and Evan Winiker Relationship Lana Del Rey and Evan Winiker Relationship
Celebrity10 hours ago

Who Is Evan Winiker? All About Lana Del Rey’s Rumored Ex

Evan Winiker and the hit pop artist Lana del Rey had something special. Something that almost resulted in a beautiful...

Leather Jackets Leather Jackets
Fashion13 hours ago

Elevating Women’s Style with Timeless Leather Jackets

In the dynamic world of fashion, certain wardrobe staples transcend trends, and womens biker jacket in the UK hold a...

Bucket List Bucket List
Lifestyle13 hours ago

Here’s Why so Many People Have Ireland on Their Bucket List

Ireland – a land of mystical landscapes, rich history, and captivating folklore. It’s no wonder that so many people around...

Sleeping Beauty Sleeping Beauty
Beauty13 hours ago

From Dusk till Dawn: Nightgowns for Every Sleeping Beauty

As the sun dips below the horizon and the world transitions from day to night, a magical transformation occurs in...

Foam Glow Sticks Foam Glow Sticks
Business13 hours ago

Bright Ideas: The Magic of Buying Foam Glow Sticks in Bulk

In the realm of event planning, creating a captivating atmosphere often hinges on the thoughtful inclusion of accessories that engage...

Blonde Afro Wigs Blonde Afro Wigs
Fashion2 days ago

7 Reasons Why You Should Try Blonde Afro Wigs At Least Once

Do you want to channel your inner diva with the fabulous blonde afro wigs? These lively and luscious hair solutions...

Everyone Else Burns Season 2 Everyone Else Burns Season 2
Entertainment2 days ago

Is ‘Everyone Else Burns’ Season 2 On The Cards?

Watching Everyone Else Burns season 2 is on the bucket of the audience. The British post-apocalyptic show Else Burns will...

Goosebumps Season 2 Goosebumps Season 2
Entertainment2 days ago

Everything To Know About Goosebumps Season 2

Everyone’s been waiting for the release of Goosebumps season 2. Disney hasn’t said that Goosebumps will return for a second...