Bookkeeping for real estate and rentals

Renting out property is a business, even with a single apartment. Income and expenses have to be tracked for each property separately, and the building has to be depreciated under its own rules. What I do: • Per-property accounting — rent, repairs, management fees, insurance, property tax, mortgage interest. A profit report for each address and for the portfolio as a whole. • Repairs vs. improvements — ordinary repairs are deducted right away, while improvements (a new roof, a remodel) are capitalized and depreciated. Getting this wrong is a common reason for IRS questions. • Depreciation — residential rental property is depreciated over 27.5 years, commercial over 39 years, land is not depreciated. I keep a depreciation schedule for every property and every improvement. • Tenant deposits — a security deposit you are obliged to return is not income. I track it separately until it is kept. • Reconciliation with the property manager — I match their monthly statements to the bank and check fees and holdbacks. • Tax-ready books — Schedule E for individuals and single-member LLCs, Form 1065 with Form 8825 for multi-member LLCs, 1040-NR for non-residents. • Non-residents with US property — by default 30% is withheld from gross rent. You can elect to be taxed on net income (after expenses and depreciation), but that takes proper books and a timely filed return. • Short-term rentals (Airbnb and similar) — different rules apply: depending on the average guest stay and the services you provide, the income may count as a business rather than a rental. The rules for landlords are set out in IRS Publication 527.