How do you categorize property expenses?

Question

How do you break down your property expenses in to categories?  For instance, Repairs, Bank Fees, Utilities, etc.  I'm looking to improve the chart of accounts that I use to give the property owners I manage for a better break down on their monthly reporting.

David Krulac · Answer

@Andrew Schultz

The way that I do it is to use the categories that are on the IRS form Schedule E, which is for rentals.  If I recall there are 16 categories, like advertising, auto, interest, taxes, repairs, supplies, etc.  There is even a couple of blank lines for some thing else.  so by breaking down expenses as the IRS does, it makes it easy to fill out your taxes at the end of the year.

Pat L. · Answer

DON"T forget this little gem for next years Tax returns.

Maybe @Joshua Dorkin could send it out under tax advantages 2014 :)

http://www.inman.com/2013/09/30/good-news-for-owners-of-smaller-residential-rental-properties/

David Krulac · Answer

@Ace A.

Hoa under Legal & Professional

Cell phone and office land line on Schedule C for business expenses

Capital improvements & Major items are not on schedule E as they should be depreciated.  Schedule "E" is for Expenses, capital improvements and major items are not expenses but capital improvements.

hth

Ace A. · Answer

Following the schedule E list.

Where would you put the following items:

- HOA fees?
	- Celluar Phone Service?
	 - Capital Improvements like New Flooring, New Paint?
	 - What about major items like new A/C, new water heater, new roof?

Steven Hamilton II · Answer

I highly recommend using the Schedule E list of items.

IRS Form Schedule E

Andrew Schultz · Answer

@Pat L. , thank you for your insight!  The software I'm using (Buildium) is capable of generating detailed monthly reports based on category and notes entered for each line item, and I can upload every invoice/receipt for ease of access.  The big advantage is that it's cloud based, so I can access everything wherever I am.

Pat L. · Answer

Drew

If you are proficient in MS Access it has the capability to generate an amazing amount of detail & reports as long as you have the time to physically enter all the detailed data.

Or you could just use something like NEAT. It's a simple scanning program that I have since implemented so that others can just scan in the volumes of data.

Furthermore, my CPA prefers the detailed reporting by property for all expenses. I break the data down by property, project & by the usual tax category, with specific notes for each expense. All of which can then be detailed in hard copy or .pdf reports sorted by any one of the various fields.

QB & the new accounting s/w I am now using requires significantly more data entry & doesn't give me the same specific expense detail by property backed up by the scanned receipt images.

During the IRS Audit I simply presented all the detailed reporting by property, complete with scanned images of all receipts. It saved me a LOT of time & the Auditor preferred to review these reports rather than the usual accounting reports generated for the LLC's.

& BACKUP everything !!!!

Andrew Schultz · Answer

That's how I'm set up currently, but I feel as though it isn't detailed enough.  For instance, the IRS doesn't care if an expense was relating to a turnover repair or a standard maintenance item.  However, some owners like to track those subsets individually.

How do you categorize property expenses?

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