The IRS requires you to maintain proper records of your rental income and expenses to ensure your income and deductions are accurately reported on your tax returns.
Records You Need to Keep
You should keep records of the dates and amounts of rent you have received from tenants, as well as any security deposits, including any deductions made from those deposits and the reasons for them. Additionally, retain copies of rental applications and leases, as they contain important details about the tenant, rental agreement, and the terms and conditions of the lease. It's also crucial to keep records of your bank statements and receipts related to rental income and expenses.
Hiring a Property Management Company
Hiring a property management company can simplify record-keeping, as they will track all information related to your property's income and expenses. This includes costs for maintenance, landscaping, cleaning, and other expenses you incur.
The Importance of Proper Record-Keeping
Good record-keeping is essential for staying organized, avoiding penalties, and complying with IRS regulations. Inaccurate or incomplete records can lead to significant issues down the line. It's also important to know how long you should keep these records before disposing of them once the retention period has passed.
Using accounting or property management software, setting up a filing system, and keeping digital copies of receipts and invoices are effective strategies to streamline tracking and record-keeping.
