How to write off general business expenses with several rentals?

Question

Hi All,

So might be a stupid question but here goes... What is the best way to categorize expenses that are for your overall business operation when you have several properties? For example say I purchase a printer, stamps, and laptop for business use. These 3 items would be used across the 7 properties I own so how would you note that on a schedule E come tax time since its used across the board for the overall operation of the business and not linked to a specific property. In the past, I have just placed each item with a different property on the schedule E but I feel like this is inaccurate and there must be a better way.

Thanks!

Rick

Taylor Brugna · Answer

@Rick Jones For your situation the best way to do it is to allocate the general expenses to each property. It can be a simple excel formula once you have your P&L broken out by property prepared. Are you using quickbooks? If you have 7 classes for each property just make another one called "Overhead". Export the P&L to excel and then allocate overhead accordingly. Don't pick one property-not only for tax purposes but it also impacts your ability to make decisions using the information on your financial statements.

Linda Weygant · Answer

I set up a separate "property" on the Schedule E called Admin Expenses or General Expenses or the like and then all of the appropriate expenses go to that property.  This includes mileage, phone, office supplies, etc.

I generally only do this if there are more than 5 properties as allocating expenses across properties is not that difficult to do.  A spreadsheet is your friend.

This also does not work very well at all if you're smacking up against the passive income limitations for those whose income levels make that a concern.

Christopher Smith · Answer

I see no problem with allocating the expenses for your general administrative costs among your various properties if those costs don't directly relate to any specific property. Just select a reasonable method for allocating these costs among the properties such as Gross Rent or any other logical metric. Reasonable allocations are done all the time in practice and are fully permissible (and in fact required) under the code. To allocate allocate all general admin costs to one property if that property should not economically bear all such costs is distortive reporting.

How to write off general business expenses with several rentals?

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