The average annual pay for a real estate investor in Alabama is almost $80,000, with top earners making more than six figures.
As a Huntsville, Alabama, rental owner, you can make this type of money with the right approach.
It all starts with rental property accounting. Implementing the best practices can ensure accurate records. Keep reading to learn how to track expenses effectively.
Go Digital
Tracking rental property accounting expenses is easier when you go digital. A digital-first mindset makes for efficient record-keeping.
You can keep hard copies of documents, but it isn't good practice. When tax season arrives, organizing your hard copies can get messy, especially if some of your documents are accidentally lost.
Opt for an online system to collect rent, such as a tenant portal. This software can help with efficient digital tracking of rental income and expenses.
Track Deductible Expenses
Track deductible expenses to maximize your returns during tax season. Some typical expenses to track include:
- Cleaning costs
- Property insurance
- Maintenance expenses
- Pest control
A property management company can implement a software program that allows you to upload paper expenses. Tracking your taxable income will help you save money at the end of the year as well.
Monitor Pay to Independent Employees
Property expenses, such as paying for independent contractors and employees, need to be monitored. The fees and salaries you pay for this help should be tracked on your rental property expenses and income sheet.
You can report this income to the IRS with the 1099 Contractor Form. Obtain an unincorporated Independent Contractor's (IC) taxpayer ID number and file a 1099 form if you pay the contractor $600 or more a year.
As a first-time landlord, you'll likely need help with maintenance and repairs. When you hire outsiders, be sure to understand the tax implications.
Check Income and Expenses With Statements
To ensure accurate rental property accounting, you should compare income and expenses to your bank statements. There might be discrepancies between these financial documents.
Set time aside once a month to check your financial documents with income and property expenses. This will allow you to know how much certain expenses totaled out to be.
Doing this periodically allows you to catch anything worth adjusting in advance. You'll have an easier time completing tax forms by taking this step.
Hire Property Management
A property management company has experience in Huntsville, Alabama. They understand tax laws and have industry experience. In addition to managing the property, they offer accounting services.
Delegating your accounting tasks to a professional can help your business grow. You won't have to worry about dealing with legal implications or tax audits from the IRS.
Rental Property Accounting: Tracking Documents Effectively
Without rental property accounting practices in place, tax season becomes even more complicated. Additionally, owners won't have a clear idea of the financial success or failure of a property.
If you don't have experience with accounting, let us help. At PMI North Alabama, we use state-of-the-art technology to improve accounting practices.
With over 20 years of property management experience, we are the ideal choice for Huntsville landlords. Connect with us today to learn more about our services.
