It’s been almost a month since we finished our taxes this year and if you didn’t have a good way to organize your finances, it was one of the worst days of your life. If you were on top of things, you found a way to do it via paper, basic spreadsheet, or maybe even an accounting or personal finance tool via desktop software you purchased or web software you accessed online.
Related: Real Estate Tax Deductions
One of the easiest ways you can save time tracking real estate investment finances is to get a hold of software such as Quicken Rental Property Manager from Intuit. I have no affiliation with Intuit and I’m not receiving any endorsements from the company. I only offer this suggestion solely because it is extremely helpful to me and many others who invest in real estate. Any financial tracking software will work if you use it and keep up with it. Quicken has been around for a long time so it has had many years to develop into the full featured program that it is. Besides that, now that Microsoft Money is discontinued, you aren’t left with many desktop based options.
What you’ll notice with Quicken Rental Property Manager, when you dig into it, is that you aren’t limited to tracking your rental properties. You can track all of your personal finances with this tool along with another small business that you have. It’s about the best you can get without upgrading to a full featured financial suite like QuickBooks.
Let’s look at the steps. A few will be painfully obvious but remember, it’s not difficult to track your investments. You just need to have the discipline to do it and stay on top of them! In the video, we show you a couple ways you can do that. If the rental property tracking looks complicated at first, try your personal finance tracking with Quicken first to get comfortable with it. If you already track your personal finances, adding rental properties to your tracking software will be a snap!
Simplifying Tax Time for Real Estate Investing
Oh no! Taxes! Just the topic itself is probably scaring you away. No worries though, and stick around, this post is designed to help make sense of it all. The key to real estate taxes is tracking your investment and keeping good records throughout the year. If you have any rental properties, this recent tax season could have been a nightmare, or very easy for you, depending on how organized you were.
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Income and Expense Categories
The best way to track your income and expenses is to use the pre-defined categories in Quicken. You’ll have income categories such as rents received and can also set up your own categories such as “Other Income” if you have coin operated laundry or other income that isn’t part of your monthly lease charges.
Expenses such as cleaning/maintenance, legal, property management fees, mortgage interest, and utilities can be tracked separately to make it easier to report your taxes. It’s not just for your taxes though. Having an understanding of where your money is going will help you budget appropriately and keep you in control of your cash flow.
If you have multiple rental properties, “Tags” are a great way to keep track of expenses on each individual property. Doing this allows you to see expenses for EACH property rather than a big pile of expenses that fly out of your checking account every month.
You can go to a simple report of your income and expenses for each property and total them up per property. You can also pull up a complete list of all of your income and expenses for the year and see how that’s going to be reported on your taxes. The best part about all of this is that you can still use your account. Just because you’re tracking the income and expenses yourself doesn’t mean you can’t have the accountant do it for you still! Print out the reports from Quicken and bring them along.
Schedule E on Tax Form
“How does this all help me with my taxes??”
Well, now that you’ve seen how income and expenses can be broken down for rental properties, take a peek at Schedule E: Supplemental Income and Loss from the IRS. If you look at lines 3 through 19 (income and expenses), you’ll notice some familiar categories. Those are the same categories you are using in Quicken! How convenient!
Long story short, Schedule E is the form you (if you’re brave) or your accountant will use to claim deductions for your rental properties. There are columns for Properties A, B, and C for each one of your properties. We call them out as Property 1, 2, and 3 in the example to make it easier for you, but it can be easily translated. If you happen to have more than 3 rental properties, complete and attach as many Schedules E as you need to list them. Answer lines A and B and fill in lines 23a through 26 on only one Schedule E. Don’t use this for the rental of personal property! This is only for real estate properties that you rent out.