For taxes, I’m determining my expenses for each rental property, and it is a pain in the neck (brain?) remembering which property and what category (repair, improvement, etc.) each expense is for.

In my ideal world, I wish there was a “universal” payment system and each time I paid an expense (merchandise, service, etc.) for a rental property, the system would ask me what property and what category (repair, improvement, etc.) the expense was for. At the end of the year (or month), I’d get a report showing my expenses for each property and category, and I could move those expenses directly into my tax return.

Do you have a system that’s as easy as the one I described above? Any ideas on how to simplify expense recording for taxes?

Now, I use Quicken for my four student rental properties, but it’s not quick at all.

Thanks for any help you can give me! - Bill

I write a note on the receipt. Makes it easy since they don't get put into the system until later.

My system isn't fancy. Just an excel file I have tweaked over the years.

As Zero said, note on receipt. I used to be diligent about writing it at the cashwrap ( check out stand, for you non-retail types) but I’ve gotten lax. I still get to those receipts every couple of weeks or so, and go back over projects to remember which house got two cans of foam, or a new closet doorknob. I also have a file folder I call Shared that things which every house gets go in there, and I apportion those expenses to the four properties as a percentage of income .

Bill I use Quicken and have for years.

A property is a Top-Level CATEGORY on both Income and Expenses.

So 100Rent is 100 XYZ Street.

Category 100Rent:UnitA is first unit, 100Rent:UnitB is second unit.

Then there is 100X for Expenses.

100X:Repairs

100X:Utilities

Etc. (all the Schedule E items.)

TAGS are also set up for each unit. 100A, 100B. That way I personally know where the money was spent per unit even though the IRS doesn't care, they want the expenses for the property not the unit but we want to know.

The different categories for expenses probably don't matter so much as whether an item is expensed or depreciated. Probably the IRS won't mind if paint, fertilizer, or a box of screws goes under Cleaning and Maintenance, Repairs, or Supplies.

I do my bookkeeping pencil on paper; a thirteen column workbook, and a sharpened pencil. At the heading on the top I write my 'rules' , what my cut-offs for expensing vs depreciation ( very low value houses, my 2% rule is tiny) how I apportion shared items, anything else I, or someone else would need to prepare my taxes. Even things like the square footage I use for my home office, along with a note ' to the extent of profit,' so I don't forget that simplified home office only goes on the Schedule E against a profit. That way, if I were incapacitated, or just having a brain f@&t, its right there. I write this up for the next year's taxes as I finish the last years. Get that info down while its fresh.

I collect my receipts in a school folder, one color for each house, plus a shared folder for the things that get used as needed for any house, such as screws, fertilizer. A couple of times a year, I organize receipts by date, marking the date with pink highlighter for easier sorting, then enter in chronological order on each worksheet. As my maintenance, repairs, improvements settle down, I might adopt a once a quarter, or twice a year schedule for entering.

Hey BUSY, I do the same, color code the files for each property and an "all properties" file for misc to grab from when general supplies are needed, w/expense spread equally over the properties from the general file.

I enter the property in the right hand corner of the receipt and list the category just under. Then file it in it's color coded file. I like WMH's idea to label a duplex expense per unit

A contractor gave me a tip years ago thatI haven't used yet, but thought it was interesting, i.e. if you are contemplating a new roof, do 1/2 roof one year and other half the following year. Then it's considered a repair...anyone know, would that fly with IRS?

I do most of my box store shopping online and put the property in the purchase order box. the utilities and taxes sort themselves out as do checks, the cell phone, mail, subscriptions etc go against an office account. it sorts itself out fairly easy. in the end the expenses are totaled on the schedule so it doesn't really matter where you put them as long as it's consistent and can be explained.

I found out a long time agone that the key to successfully maintaining paperwork for accounting purposes is to develop a system that you can easily understand which is not necessarily the way that an accountant might do it. Once you've gotten "YOUR" system make sure you follow it each time you make a purchase or pay a bill.

We use quick books in conjunction with our own shorthand type of record keeping for our rental properties, our contracting business, our consulting service & our personal stuff. For instance, if I buy gas for my rack body truck, I make a note on the slip SMC / WDT before I put it in my wallet. Then when I get home, I have a basket in my office that these slips go into on a daily basis. Then every week or so my bookkeeper aka DW enters them into the correct business / property / project / personal according to the categories we have setup in quick books. She also does this with bills that I rarely ever see such as utility, W&S, insurance, charge cards, statements from supply houses, etc as well as with monies coming in. The only time that I ever see these types of bills if she has a question about them or if there has been a dramatic change like you might see if a W&S bill spiked.

Once they're entered it just takes a few seconds to find out how things are going with any property, project or business. The key thing is to develop a system that is easy to use & to consistently use it. KISS

It's like the old saying "How do you eat an elephant?" One bite at a time. (g)

Wife bought two baskets for her desk. One says crap to file and the other says crap to shred.

Wow, thank you so much for your responses!

WMH, I was more looking for a way to identify the property and category at time of purchase. At home depot, when I use my business credit card, it asks for a job name and I put in the property address. I like that home depot does this and was looking for a way to make this type of identification universal across all the purchases for the good and services gotten for the rental properties. But good info on using quicken. I never really thought much about using the tabs, but what you said makes sense and is helpful. Thanks.

Busy, those were some interesting points you made about “whether an item is expensed or depreciated”. I’m embarrassed to admit I have little idea on when something is an improvement. I have this vague idea the with some minimus safe harbor I can just treat everything as a repair, but I see I need to do my homework and get smart on that. That’s great putting the “rules” at the top of the accounting. I think IRS asks for this too. What I’m thinking, instead of marking the receipts periodically, is to just mark them up at time of purchase, showing the property and the expense category, as zero, Busy and Dee Ann mentioned.

Dee Ann, I really like the idea of the spreadsheet and modifying to specific requirements mirroring the tax return. That sounds way easier than what I go through on quicken.

Good stuff Small potatoes. That’s what I do too at the box stores, put the property in the PO box. I’m thinking maybe adding the category too as the use for the purchase will be fresh in my mind at the time of purchase.

Jim, what do you mean about lumping all expenses together? Don’t you need to specify the category for tax purposes?

Steve, that is an encouraging saying, “one bite at a time”. Sometimes I look at things as a giant project and feel overwhelmed. But wow, you’ve got an operation there. I just have four rentals and I’m whipering:-) But yeah, do things on a “daily basis” is key. Thank you!

Zero and MikeA it seems like a common denominator with you both and many other posters, that it’s important to get the payment details recorded as soon as possible.

Makes me think my original “universal” payment system is an unmet need. Wouldn’t it be nice to have an app on your phone (for example), to pay for everything rental property related, and it would ask you the payment details (property, expense category, etc.) at time of purchase and automatically enter the expenses and automatically total up everything so you could see it all in real time? And those totals could be brought into your tax returns as-is.

Zero, I laughed. Your wife sounds fun.

Busy, she does all the bookkeeping with very few exceptions.

When we started out she helped with the rehabs as did the little ones. Now it's just me. I might get her to pick something up that I need if she's in the area, but no more working on the properties for her.

Zero, to encourage wifey, and make it a little more fun, perhaps write a quick love note to slip in the stack of receipts occasionally, or even just print a joke you read. Kinda like parents slipping a note in the kids' lunch boxes.

Busy,

Are you talking with my wife?

I actually put a note or such in the paperwork. I do it just to relieve the monotony that she goes thru doing all that.

Just ran thru the crap to file tote and snagged all the receipts. I enteres them all to date into the system. She was happy for the assist, but honestly I just wanted to see what he totals were to date with the three rehabs I just finished... (shhh, don't tell her)

Bill, the tags are important for our own budget. "How much did we spend on that rehab of Unit A?"

Because I track everything daily, it takes me minutes not hours.

We pretty much stick with Home Depot because of their record keeping and how much it helps ours. We use the PO# on the receipt to record not just the address but the unit. "181B" "987A" shows up on the statements, too, which we download into Excel and sort accordingly. Then I take the total and enter it in Quicken.

I just brought in three more receipts. Instead of putting them in the tote I entered them and put them in the bound stack of already entered.

Maybe I will start doing this on a weekly (or less) basis. Makes it go by faster when you don't have a hundred to do at one sitting. Plus I know what I have spent instead of waiting until everything gets entered.

WMH, I like HD too for that reason. It’s great to have all the on-line and in store purchases in one place, on their website. I do the same thing paying at HD with my business credit card, putting in the property address in the PO/Job field. Tell me, why don’t we also add the category into the PO field at HD? That is: repair, maintenance, improvement, etc? It’s fresh in your mind at that point.

And is the intermediate step of downloading into Excel needed? Why not just download the credit card transactions into quicken and use the HD statements to determine what property the expense is for? And if you have categorized like I suggested above, you’d have that information on the HD statement too (repair, maintenance, etc.) Of course, you are way ahead of me on this, so what do I know :-)

I think the key to your system is you have developed some good habits, which is what I need to do too, and not wait until before Tax Day. Thanks so much for the input!

Zero, how about every time you enter a receipt, you get a chocolate square :-) I would like that. Heck, with all our technology, it could be automated. Just need the chocolate dispenser connected to your computer :-)

After the three rehabs I just completed I would be in a sugar coma for sure.

I have an AMEX card for Lowes that has a P.O. prompt. I was doing that but then if I had items for multiple properties it would throw me off.

Thanks for the laugh on that one! Sugar coma.

BillW.

A little discipline goes a long way. It's like maintenance - take care of it now because it's quicker than trying to figure it out later.

Rule#1 NEVER write a check or pay cash in the field.

We charge it on a Lowes LAR card which gives me an automatic 5% discount AND requires a PO number at the cash register. We use the house address number. This PO# shows on the receipt AND on the monthly statement.

Home Depot is the same system.

Odd purchases such as fuel, Porsche parts, office supplies or WalMart are all paid by credit card for airline miles. We write the house number or OFFICE on the receipt.

That's 3 credit cards to run our business.

Utility and contractor, vendor bills that arrive by mail are ALWAYS paid from Quicken, along with the credit card bills.

Hire a child to key in the payments to write the checks. Pay with chocolate or video games.

Also, seriously consider hiring a bookkeeping service. There are people who LOVE LOVE LOVE doing this bean counting for a small fee.

You take the bills to them and they key it in. Done.

BRAD

BillW,

The only time I do separate purchases is if I am at say walmart and need to buy office supplies along with food. I will do two purchases because they are on two different cards.

I used to go to Lowes about every other day. Sometimes twice a day depending on the work load. Now I try to stack up what I need and make less trips. It always takes me a long time to get thru the local store because I nib at a few different sections looking for deals. Then the regular employees will chat me up and maybe have some items being heavily discounted. Then I spend even more than planned.

It would take way too long to run say five different transactions. Instead I write the property name(s) on the receipt and what the items are, if they have cryptic descriptions on them.

Thanks BRAD. Why no “write a check in the field”? Some people I work with want to get paid as soon as they are done, and I figure it’s good business to pay them immediately. I’m curious to know your thoughts on this.

Interesting on the Lowes card. Home depot automatically asks for a PO # when I use my business credit card, but for Lowes the PO# is optional info, I think, and if you use a cashier (not self-checkout) they wont ask for it, when using my business credit card.

I do like getting the 5% discount, so I think I’ll go with the Lowes card. I did a little looking and saw these tidbits: “just say ‘Can you match Lowe's 5% discount? If so, I'll use my Home Depot credit card.’ and they will always give you 5% off. They come with steep APR's (of course). Just make sure you're paying your balance in full every month or you'll be losing much more than the 5% back you got.”

As for keying in the bills: it just seems to me something I could automate. For example, I could just about take the purchase history from HD website and move it into a spreadsheet and have it group the categories by property and category and add it all up.

BTW, why do you record expense category (repair, maintenance, improvement, etc.) at the time of purchase? You record property address. Thanks!

Zero, yeah I just have four houses. I can imagine you might hear some grumbling in line if they had to wait for say five different transactions. I’d be ok if I was behind you, as long as you gave me a chocolate square or two.

BillW,

If you ever end up behind me in line one of us has stepped up to the big time. My meager 23 units are all in one county of the same state.