Around $700 billion is spent on rent within the United States annually.
Of course, you won't be handling all this cash. However, you receive significant passive income as a landlord. So, rental property accounting is vital.
Managing property taxes, rental income, and other revenue is no easy matter. There are several legal factors and calculations to consider. People spend thousands of dollars to pass the job on to someone else.
Fortunately, there's a way to keep your money in your pocket. Read on to uncover everything you need to know about rental property accounting!
Income Reporting
As of 2023, the average tenant in the U.S. spends $1,326 on rent. You must report everything to the last penny, whether you receive more or less.
Every household will have various costs and income sources. Nevertheless, you must always include the rent fee and utilities from all of your units. It is also essential to add a security deposit, but be sure to store this in a separate account.
Another expenditure that many beginners forget to add is any late payment fees. This will vary monthly, so make a note each time you report your income.
Georgia State Taxes
They say three things are certain in life: births, deaths, and taxes. Even Benjamin Franklin once stated these iconic worlds.
It is crucial to do your homework as each state and region will have different tax laws and levels. To become a landlord in Atlanta and earn real estate income, you must obey the Georgia State taxes.
In the state of Georgia, there is a flat residential tax rate of 5%. Make sure to pay these taxes promptly to avoid penalties.
Record Keeping and Documentation
Proper record-keeping is crucial for landlords in Georgia. This includes maintaining records of all financial transactions related to the rental property.
Some documents include rent payments, expenses, and repairs. You should also keep copies of lease agreements, receipts, and correspondence with tenants.
Organized records help with tax reporting and serve as evidence in tenant disputes.
Depreciation
Did you know that depreciation could work to your advantage?
As the value of your home decreases, you can use this as a tax reduction. This is one of the simplest yet most effective insider tips for real estate accounting.
To utilize this opportunity, you need to research and understand the rules. Otherwise, you could pay more on legal issues. Hiring a property manager can inform you about this and is one of the many benefits of hiring a management service.
Expenses Deductions
Expense deductions are the backbone of bookkeeping and real estate accounting. These are expenses you can deduct from your income when calculating taxable income. So acing this element is essential for generating as much revenue as possible.
Some of the most popular expense decisions for landlords in Atlanta, GA, are as follows:
- Maintenance costs
- Property taxes
- Mortgage interest
- Property management fees
- Home Insurance
- Utilities
- Advertising and marketing
- Travel expenses
Master Rental Property Accounting
Mastering rental property accounting doesn't involve rocket science. However, you may feel it does if you don't know how to navigate the matter.
After reading our guide, you discovered five stages to becoming a financially secure landlord. Take it a step further and plunge into the world of PMI Atlanta West owner resources!
