Property Manager Fees & Income Tax

Southern, CA · Member since 2017 · 34 posts · 9 votes

Hi everyone,

This is my first year owning a rental property. My property manager shows fees like "posting & processing fees", "software", "showing the unit" in his financial statements. How should I handle these for tax purposes? Should I keep them in my spreadsheet (which I plan to share with my tax preparer)? These fees are in addition to the monthly fee I pay him. Also, I've noticed that the "posting & processing fees" are charged to me and later charged to the tenant so they cancel out. I am assuming that if the tenant doesn't pay it back, they will stay as an expense to me.

Thanks in advance for your input! :)

Jessica

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Robert GilstrapPro Member

Residential Real Estate Broker · Cartersville, GA · Member since 2015 · 575 posts · 581 votes

@Jessica H. Your question is a taxation question and the short answer is that pretty much every cent you spend paying the PM to manage your property is an expense that will be written off on your taxes. You should be getting a year end statement from your PM and you can just hand that to your tax preparer instead of you having to keep separate spreadsheets (unless you just want them for yourself).

Some expenses might have to be capitalized vs. being a direct full write off (like a full roof replacement vs. a roof repair) but your tax person can help you with that. Whatever you do don't just blindly assume your tax person knows everything and will act in your best interests. Learn about how real estate taxation works and go over what they are doing because the implications can be major. If you need major tax deductions to offset other income talk to your CPA about component or cost segregation depreciation. If he/she doesn't know what that is then find a new CPA!

[email protected]770-480-7301

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Irina Belkofer
Real Estate Broker · Cleveland, OH · Member since 2017 · 719 posts · 658 votes
7y
It should be in your property management agreement - all the fees your PM charging.
They all go in your tax return as expenses and decrease your profit.
When you signed the PM agreement, you should have to negotiate everything which looks unusual for you.
If you pay money for placing Tenant, showings are included in that.
Software is a Programm for PM? It's on your PM overhead and not charged separately unless you agreed to.
What's the positing&processing fees?
I'd rE read you PM agreement and then asked the PM questions. Better would be to ask before signing one though
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Nathan GesnerBusiness Member
Moderator
Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
7y
Anything charged by your PM should be covered as property management fees.
Sounds like a nickel-and-dime operation.
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Robert GilstrapPro Member
Residential Real Estate Broker · Cartersville, GA · Member since 2015 · 575 posts · 581 votes
7y
@Jessica H. Your question is a taxation question and the short answer is that pretty much every cent you spend paying the PM to manage your property is an expense that will be written off on your taxes. You should be getting a year end statement from your PM and you can just hand that to your tax preparer instead of you having to keep separate spreadsheets (unless you just want them for yourself).
Some expenses might have to be capitalized vs. being a direct full write off (like a full roof replacement vs. a roof repair) but your tax person can help you with that. Whatever you do don't just blindly assume your tax person knows everything and will act in your best interests. Learn about how real estate taxation works and go over what they are doing because the implications can be major. If you need major tax deductions to offset other income talk to your CPA about component or cost segregation depreciation. If he/she doesn't know what that is then find a new CPA!
[email protected]770-480-7301
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Ali Boone
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
7y
I agree with everyone else, it will all be written off. But what are those extra fees for exactly? All of those things should be covered under your monthly fee. How much and how often are they charging for all those misc things?
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