Greetings from California

[Nadra Ostrom]

Hello,

I'm new to real estate investing. I'm in the process of purchasing a single family home to rent in the Central Valley, CA. My accountant asked me if I want to track income and expenses on a cash or accrual basis. Anybody have any advice on that?

[Ashish Acharya]

Hey Nadra, welcome to the community and congrats on your first rental purchase. Great question and for most individual landlords starting out, cash basis accounting is the simpler and more practical choice. Like Justice said you will record income when you actually receive it and expenses when you actually pay them, which is straightforward to track and matches how most people naturally think about their finances.

Accrual basis can get complicated fast and for a single family rental it's usually overkill. The IRS also generally allows smaller landlords to use cash basis, so unless your accountant has a specific reason to recommend accrual for your situation, cash basis is typically the way to go.

The more important thing at this stage is just making sure you have a clean system for tracking everything correctly like, income, expenses, mileage, repairs, everything. That'll make your CPA's job a lot easier and make sure you're not leaving any deductions on the table. Definitely worth having that conversation with your accountant and making sure your overall tax strategy is set up correctly from the start, not just the accounting method. Happy to connect!