What Are Allowable Expenses for Rental Income, and How Do I Track Them?

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If expense tracking is a confusing mess to you, you'll be glad to know this article is just for you. Many landlords struggle with rental property expense tracking. They wonder what to track, what to deduct, and what tools to use for tracking. Read on for answers to those questions and more, courtesy of Rocky Mountain Short Term Rental. 

 

Allowable Rental Property Expenses 

First, understand what expenses are covered as a rental landlord: 



  • Operating expenses

  • Repair costs

  • Mortgage interest

  • Property taxes

  • Advertising

  • Utilities

  • Insurance

  • Maintenance

  • Pest control

  • Flooring

  • Inspections

  • Depreciation



The IRS allows landlords to recover expenses by accounting for the wear and tear of the property. Using Form 4562, landlords can deduct some or all of their original acquisition costs and the cost of any improvements made to the property starting in the first year of renting out the property. 



How to Track Your Rental Property Expenses

In the past, the best way to track rental property expenses was to use a spreadsheet. While this is still an option, and, as Zillow points out, templates made for tracking rental property expenses are a great tool, there are better ways. Two of these ways are a property expense tool and business expense tracking software.

 

Property Expense Tools

These tools make it easy to see what expenses you have compared to rental income. They vary from platform to platform in their features, so finding the right one is often cumbersome. 

 

One of the best rental property expense tools is Personal Capital. You can link your properties and assets within the platform, and Zillow is fully integrated with the app so that you can monitor your money more easily. 

  

Key Features of Personal Capital:

  • Automated net worth tracker

  • User-friendly

  • Free retirement planning

  • Integrated with Zillow for home price estimates

  • Limited tax planning capabilities and accounting functions

  • Financial planning platform



Business Expense Tracking Software

Business expense tracking software offers far more than property expense tools; in fact, experts note that financial tracking software is among the top tools every startup and small business should employ. The difference between platforms like Personal Capital and a business expense tracking software like QuickBooks is that Personal Capital tracks just that - personal capital. While you can track your rental property income and expenses with the tool, you miss out on some highly valuable features when choosing the tool over the software. 

 

What should you look for in business expense tracking software?

When choosing a business expense tracking software, look for features that protect from costly mistakes, like tax penalty protection and auto-calculations. Another type of protective feature is security functions that protect your data from hacking attempts. 

 

Additionally, if you have employees for your rental business (contractors or property managers, perhaps), look for a platform that offers automatic payroll scheduling, automatic calculating and tax filing, and same-day direct deposit. When you automate payroll via payroll apps and software, you make wage calculation a quick and smooth process. 



You can also make changes more quickly and improve your recordkeeping and timekeeping. Ace Cloud Hosting explains that software like QuickBooks Payroll offers all these benefits and integrates into other administrative functions, reducing your workload and streamlining processes so you can maximize your return on investment.  

 

The key takeaway is that expense tracking and tax deductions are simple with business expense tracking software and property expense tools. While each has its benefits, business expense tracking software can integrate into other business tools, reduce your repetitive tasks, and give you back your time. 


You can sit back and relax while Rocky Mountain Short Term Rental converts your space into a 5-star vacation rental property. Our premium service provides data driven success, maintenance, repairs, cleaning and more! Request a 10-minute consultation today!



Written by Natalie Jones of homeownerbliss.info/

11/01/2021