Real Estate Agents: Don’t Ignore These Tax Rules

By Andy Mulholland

He has a background in leading a top real estate team for over a decade and an understanding of the critical role of clear financials, Andy, along with his wife Ellyn, a seasoned real estate CFO, co-founded Simple-Numbers.

Many real estate investors and landlords don’t realize how much they’re giving up in taxes because their bookkeeping isn’t set up right. Missed deductions, poor records, and confusion around depreciation can lead to a bigger tax bill than necessary. Today, I’ll break down the tax implications in real estate bookkeeping and show you what you need to know to avoid these:

1. Income must be tracked. All rental income must be documented including not just monthly rent, but also the application fees, cleaning fees, and any other payments you receive related to the property. Failing to record these will risk you of filing an incomplete return. If you overreport, you’ll pay more than you owe.

2. Depreciation reduces your taxable income. Depreciation allows you to deduct the cost of your property over time. For residential rental properties, that’s typically 27.5 years. This can lower your taxable income each year, even if it’s not a cash expense. But to claim it, your books need to clearly show your purchase price, the value of the land compared to the building, and when the property was placed into service.

3. Deductions depend on good records. You can deduct expenses like mortgage interest, property taxes, insurance, maintenance, travel to and from the property, and office use. However, you can only do this if they’re well-documented. Bookkeeping software makes this easier, but even a spreadsheet works if you’re consistent.

Tax season shouldn’t be a guessing game. Good bookkeeping protects your income, maximizes your deductions, and keeps you compliant. If you’re unsure where to start, you can email me at andy@simple-numbers.com, and I’ll help you ensure you are tracking the right numbers for your real estate business.