It would save me a lot of time, going through receipts, if I could for example, total up what I spent at Lowes and just take the average expense for each house and report that on my taxes?

Would that be ok, or do I need to report exactly how much I spent on each property for every toilet flapper and air filter. It would be nice if I could just take the total amount spent and divide it by 4 (the number of houses I have) and report the average expense. What do you think? Thanks!

Good question. Hope someone here knows.

I only do that when I buy something that will likely be used be used at all the properties at some time or another. i.e., cleaning supplies, plumbing supplies, salt for ice removal, yardcare supplies like grass seed, fertilizer, website expenses, copier paper, etc.

You can do whatever you want until you get audited if ever. Then you have to back up what and how you claimed it. Which is why my CPA files a Schedule E per PROPERTY, but wants me to track the dollars spent per UNIT per property...to be kind to future me.

when doing a fix up we keep an acct folder and its added to that particular property.

Most times we buy bulk like water heaters or dishwashers-- they go to the warehouse and don't have a particular property

One of our line items is "office". bulk items go there.

The only thing we average out is fuel and auto expense. We have 3 CC's used only for auto. The end of the year we tally up and divide by 63 and each schedule gets its share of the auto expense on it's schedule.

Paper bills: we have the 5x8 envelopes hole punched into a binder with the house street. Each year we create a new binder. The end of the year the whole binder is placed into the tax box.

I have an office supplies tab and a general tab.

Anytime I buy bulk items I just run it in the general tab. I guess it never gets put on a specific property. Never thought about just dividing the total among the number of units.

Zero, I'm hoping that somehow your general tab gets divvied out to your properties. Otherwise, time for amended returns.

What I do is: a folder with an olde school green ledger for each property, then another folder called SHARED. Things like bags of Milorganite, gloves, lightbulbs, Mr. Landlord Conference, Nolo Publisher's books, postage stamps, the phone bill, all go into the SHARED folder, and on the SHARED ledger. At year end, when things are tallied, the SHARED folder items are apportioned out to my four properties, using any method that seems reasonable, as long as it is consistent. In my case, I apportion out based on the percentage of rents received. Others might to it based on square footage of properties, if they have vastly different properties; mine are quite similar to each other. And, there would be other ways to apportion the shared expenses, as long as the taxpayer uses them consistently from year to year.

This is for expensed items. For depreciable items, the item gets assigned to a particular property, and I generally rotate through as MAT does. With the new(ish) Safe Harbors for smaller ( businesses, ohc... forgot if that's the term,) many of the items that would have been depreciated in the past, now can be expensed. For me, because of the very low value of my rentals, I use lower than the full amount allowed to expense, so I continue to depreciate things like my new sod kicker I just got. But, for most areas of the country, the real estate value is substantially higher, so most of y'all would expense that. ( my husband is very risk-averse, so I keep my taxes well on the side of not questionable. To me, this holds more with longstanding tax laws. Guess I don't like change either. But, I've digressed...)

Good stuff Busy! What you said about apportioned out based on rental income and keeping consistent year to year makes a lot of sense.

Good reminder on the Nolo book. I have the 13th edition and just ordered the 19th edition of “every landlord’s tax deduction guide”

And that’s easy, just having individual folders marked with the year and property, along with a common folder marked with the year. If I had done that, I probably wouldn’t be trying to average things so much.

I do use a lot of the on-line records available. For example, at home depot, when I purchase something on-line or in store, I input the property code (a single letter), and the expense category code (a single letter for (repair, improvement, Cleaning and maintenance, etc.). At tax time, I go online, download the HD transactions for the year and then in excel make a pivot table and it totals all the same properties and categories and I’m done with HD expenses. I have not found the Lowes website to be so good, so I need to go through their receipts (ugh).

myob, why do you break it up in to quarters?

I use quicken split function to break out PITI for mortgage payments, but didn't think about using splits as you described. Thanks!

I reviewed the 2022 instructions for Schedule E and there was nothing on averaging costs across different properties.

I searched on-line for guidance on averaging expenses across different properties, but found nothing.

It seems that all of us do some averaging across properties.

Keying in on WMH's point about an audit, I guess it makes sense to think about producing records for an audit and it would be easier to produce those records, if most expenses were tied to a specific property and not averaged, as I proposed originally.

Thanks everyone!!!

BillW we do a file for quarterly splits because a visa bill may have 5 or more purchases for 5 or more property's. We don't make a receipt for each property. We put the total cc bill in the quarterly file and assign the splits from the one receipt. When I go to h-depot I might be buying for 3 property's.

From what my CPA told me, the IRS prefers expenses be broken down by property. You can try to average, but if you’re audited, the IRS might want more explanation and verification.

The contents of each property folder, with their accompanying spreadsheet ( I'd probably print the Excel spreadsheet if I did them on computer) along with the Shared folder contents and spreadsheets, plus all of my bank statements for rentals, my mileage logs, a copy of our tax return, and any of my spouse's tax paperwork go into a clear plastic bin with lid and handle, labeled for the year. My little corner office in my basement has a wall of bins. There's room for more, but, if I were a bigger operation, I'd probably have to keep older records in digital format only.

The trouble with my printed paper system is that thermal printed receipts fade over time. Mine are kept in a cool basement, yet, when I looked up a receipt from eight or nine years ago, it was barely legible, and a few others were pretty much blank, at this point.

With audits on the uptick, I wouldn't. Just finished my taxes and everything got calculated separately for each property.

Map,

How do you deal with say bulk purchases that are not for any particular property?

I bought a lot from auctions this last year. Didn't want to just dump them on properties when they are sitting in my warehouse.

I can understand in making things easier for yourself in the book keeping. I would be lying if I said I don't do any that averaging in my expenses. My website would be a prime example of this. How would one really make this equable without dividing it across multiple units?

But should you ever do this to the point where it raises red flags and makes it harder for you to defend in the event of an audit? If you believe the 1,700,000 Land lord replies on the BIZSTATS dot COM website, somewhere in the neighborhood of 8% of gross should be used for repairs and maintenance. That can be problematic if you are dropping $15,000 on a place when you buy it. That is easier to show on a schedule that says the property was out of service for 60-75 days (which is also part of the schedule E).

Some things are legit for all properties: web site, office, etc.

Once a month we download our Home Depot statement into Excel and assign units to each line item invoice (unit is listed on the invoice) then a total to the property, even if it was all spent on one unit. Since you don't file a Schedule E per unit, it's the only way to do it.

Lowe's makes it much harder so we only use Lowes for certain things.

Some things are legit for all properties: web site, office, etc.

Once a month we download our Home Depot statement into Excel and assign units to each line item invoice (unit is listed on the invoice) then a total to the property, even if it was all spent on one unit. Since you don't file a Schedule E per unit, it's the only way to do it.

Lowe's makes it much harder so we only use Lowes for certain things.

WMH, I didn’t understand your second paragraph. Not sure what you meant by “by assign units”. I’m guessing you mean an apartment in a house/building? And that’s why you say, “don’t file a sch E for each unit.”

You may be doing this already, but what I do at HD, when purchasing online, or in-store, using my business card is assign a property and category at the time of purchase. In store, the cashier will ask for a PO/Job name and I give the person two letters separated by a comma, the first letter the property initial and the second the initial of the category, e.g., R for repair. Then when I download the HD transactions, all I need to do is a pivot table and all the totals are tabulated for each property and category.

I agree, Lowes makes it much harder.

Thanks for explaining that myob. Your more organized than me and I’d imagine have a lot more properties. When I go to HD, I’m usually purchasing for a single property, so I can specify the property and category right at the store as I described to WMH. I’m guessing you must mark the receipt, at the store, to specify which line item if for which property, before you forget.

Jim in O C, thanks for the heads up on that and the reminder of what to avoid :-)

Busy, that is a nice way to do it. Print out the spreadsheets and all the other information and put it in a bin. I like that. Maybe you need to get a vacuum wrapper machine at Costco and wrap the bin so it will last a long time :-)

Thanks mapleaf, for the reminder on the uptick and the reminder on the backups.

Thanks Ray-N-Pa for the guidelines on expenses and the recommendation not to average my Lowes expenses:-)

Bill I have a few properties but don't allow the bookkeeping to get away from me.

I have a hanging file on the office wall. Receipts go in there every day. Headings are: gas, cash, visa, amex.

Thank don, that sound good and makes sense that “Some, however, either cannot be assigned to one property (education, cell phone bill) or as a practical matter the breakdown would be so minute that it is not practical (a container of wire nuts that you keep in your tool box, plumbers putty, box of screws, etc are all gonna be used on multiple jobs). This second category, according to my tax preparer, gets assigned to any property you choose as the designated "catchall" expense property” I like that.

Thanks myob, good idea on the “splits” folder. Good to know about you never depreciating. Don’t you do improvements? :-)