How To Track Rental Property Expenses On The Go

Real estate investing allows you to leverage your cash and build equity in a cash-flowing investment. This though isn’t the only benefit of real estate. 

There are several regular expense deductions that you need to track, such as depreciation, mortgage interest, and pass-through taxation. These expenses can be set up as recurring expenses in a landlord app such as Landlord Studio so that you don’t need to worry about tracking them manually.

However, not every expense is routine. Many will be one-off or otherwise irregular expenses. For example, maintenance or management costs. These expenses can build up over the course of the year to make up a sizeable chunk of your deductible expenses. But, if you want to claim them at tax time, they must be properly recorded with relevant supporting documents as proof.

Using a system like Landlord Studio you can track your rental property expenses on the go and stay organized throughout the entirety of the tax year so you can save time, sanity, and money.

Why It’s So Important To Keep Your Rental Property Expenses Organized

Tracking your rental property expenses on the go and keeping organized books not only minimizes the risk of IRS audits, particularly in areas like large or ambiguous deductions, but it also allows you to track your portfolio finances on a month-to-month basis. This is essential if you want to operate a profitable portfolio. Highlighting areas of overspend and allowing you to make informed financial decisions to achieve your financial goals. 

Furthermore, if you want to claim the maximum allowable amount in tax deductions at year-end you need meticulous and substantiated records. 

During an IRS audit, you will be asked for receipts or payment proof for each of your substantial claims. Without proper documentation, expenses may be disallowed, leading to recalculated taxes, penalties, and interest. 

Having a system in place specifically for keeping all your detailed records in one accessible location simplifies this tracking process, saving you time, maximizing deductions, and minimizing errors during tax filing.

How Much Can You Deduct as A Landlord?

The IRS views rental income as passive income. This means your rental property expenses (passive losses) can only be deducted against your rental income (passive income). If you make a loss on your rentals, eg. your rentals generate $20,000 in rental income and $25,000 in expenses you would report a $5,000 loss and this loss would be carried over into the following tax year - you cannot deduct it against non-passive income such as your W-2 income.

There are two exemptions to this rule. 

1. If you actively participated in the management of your rental property, you may be able to deduct up to $25,000 against your non-passive income each year so long as your modified gross income doesn’t exceed $100,000.

2. If you qualify as a real estate professional then your rental income and expenses are no longer treated as passive and you can deduct rental losses against non-passive income sources. Qualifying for Real Estate Professional status comes with some stringent rules including proving you spent more than 750 hours actively participating in the management of your rentals.

For more detailed information read the IRS Publication 925: Passive Activity and At-Risk Rules

‍Related: How to Transition from Spreadsheets and Paper to a Modern Rental Property Accounting Software

Necessary Records for Rental Property Owners

Rental property owners must maintain two key types of records:

• Profit and Loss (P&L) statements detailing incomes and expenses for each property.
• Supporting documents, like receipts and bank statements, to validate the accuracy and legitimacy of P&L entries.

While this may seem straightforward, the task of record-keeping can quickly become overwhelming, especially considering the array of potential expenses, even for those with just one rental property. 

Plus, if you’re managing your rentals on the go finding the time to sit down at a desk and organizing all of these relevant documents can be hard. 

Here are essential records to retain:

• Purchase-related documents: Settlement statements, escrow reports, and property inspection records.
• Tenant leases: Including applications, tenant screening reports, lease documents, and any tenant-related correspondence.
• Financial transactions: Proof of rental payments received, bank statements for property operating accounts, and invoices for expenses.
• Professional services: Invoices from leasing agents, property managers, attorneys, and accountants.
• Marketing expenses: Documentation of costs associated with advertising vacant properties and preparing leases.
• Mortgage documents: Detailed records of loan payments, including principal, interest, taxes, and insurance.
• Tax records: Copies of federal, state, and local tax returns, along with records of sales or rental taxes paid to authorities.

It’s advised you consult with your accountant or CPA to get guidance on record-keeping best practices to ensure you’re doing everything correctly and in line with your specific business needs.

15 Rental Property Expenses You Need To Track

There are 15 expense categories on the Schedule E tax form. Some are fairly self-explanatory, such as advertising expenses, whereas others require a little more explanation. Below we go through each of the categories to make sure you’re using them correctly.

1. Advertising: Expenses related to marketing the property, such as newspaper ads, online listings, and website costs, are deductible.
2. Auto and Travel: Deductible expenses include vehicle mileage, airfare, and half of meal costs during business-related travel.
3. Cleaning and Maintenance: Costs for routine upkeep like gardening, pest control, and snow removal are deductible.
4. Commissions: Expenses for finding tenants are deductible, excluding commissions paid to real estate agents for property purchases.
5. Insurance: Premiums for property insurance, including additional policies like flood protection, are deductible.
6. Legal and Professional Fees: Deductible fees include those for paperwork oversight, tax preparation, and CPA services.
7. Management Fees: Fees paid to property management services are deductible.
8. Mortgage Interest: Deductible interest payments on property mortgages can be listed as business expenses.
9. Other Interest: Interest on loans for property improvements or repairs is deductible.
10. Repairs: Costs for fixing issues that maintain the property's working order are deductible.
11. Supplies: Expenses for office equipment and property management tools are deductible.
12. Taxes: Property taxes and related fees are deductible expenses.
13. Utilities: Expenses for covering utilities like gas, electric, and internet for tenants are deductible.
14. Depreciation Expense or Depletion: Depreciation of property and equipment used for management or improvements is deductible.
15. Other (List): Additional qualifying expenses related to property ownership, maintenance, or management can be listed under this category.

Read our article A Complete Breakdown of Your Schedule E Categories for more details on your rental property expenses

How To Track Your Rental Property Expenses On The Go

There are various online software options available for real estate investors to monitor rental property expenses.

Examples include basic spreadsheets, as well as personal and business accounting software like Quickbooks and TurboTax, along with property management systems such as RentRedi and Appfolio.

However, many successful investors prefer Landlord Studio for tracking their real estate investments. Landlord Studio is an asset management system specifically crafted by real estate investors for real estate investors. The platform has garnered attention from reputable publications such as BiggerPockets, Forbes, and Inman.

Landlord Studio's rental property management software caters to landlords managing a diverse portfolio, whether it's a single-family rental home or multiple properties, including multifamily properties, commercial assets, and short-term rentals.

Features To Look For: Tracking Rental Income and Expenses On The Go

Mobile App - To track rental property income and expenses on the go you need a high-quality mobile app that allows you to simply enter expenses in real time.

Receipt Scanner - Having a system that allows you to digitize receipts will help you keep them organized and ensure you never lose a receipt again.

Online Rent Collection - A big part of running your rental business is collecting rent. Having this built into your expense tracking system will help you streamline income tracking and help you reduce the chances of late rent payments. 

Bank Feeds - Having a system that allows you to connect your bank accounts and easily reconcile transaction in the app will reduce manual data entry saving you time and reducing bookkeeping errors. 

Advanced Reporting - Your books are only as good as the reports you can run. Having detailed customizable reports that you can generate when you need will give you clear oversight of your financials and help you achieve your financial goals.

Property Management - There’s more to running a rental than just tracking the expenses. The best systems will also incorporate key property management tools such as document storage, lease management, rental listings and syndication, tenant screening, property maintenance management, and more.

How Landlord Studio Can Help You Track Rental Property Expenses On The Go

Landlord Studio is available on all devices meaning you can easily update your income and expenses wherever you are whenever you need to. This effectively means you no longer have to sit down at your computer at the end of the day or week and spend hours entering expenses. Instead, enter them as you go.

The IRS requires you to keep all your receipts as proof of your expenses. In the past, this has resulted in shoeboxes and filing cabinets bursting with old receipts. This is at best unwieldy, and at worst sorting these could take you hours or even days.

Thankfully there is a better way. With Landlord Studio you can track rental property income and expenses anywhere, anytime.

Use your phone camera to digitize your receipts as you get them and attach them to the relevant expense. Our smart scan receipt feature automatically reads the receipt and enters the details for you. 

Leverage our AI powered bank feeds feature to import up to two years of transactions and create rules, for fast transaction reconciliation

Use our built-in GPS mileage tracker to keep your detailed mileage log to make sure you’re making the most of your travel deductions.

And instantly generate any of over 15+ accountant-approved reports including a P&L, Rent Ledger, Rent Roll, and a specially designed Schedule E report.

Ditch the spreadsheet and reduce your bookkeeping admin by tens of hours so you have more time to spend on what matters. Stay on top of your finances and never miss an expense again and save $100s more at tax time.

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