what do you use to track FixedAssets for depreciation/amortization?
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Investor · Member since 2024 · 77 posts · 105 votes
2yQuote from @Andrew C.:
I'm using Quickbooks to track overall finances. So I have a FixedAssets account in the chart of accounts, but that's not really usable for tracking the per-item depreciation...there's no entry for when it was placed in use, no way to state depreciation lifetime, nothing that ties loan points to the loan so you notice when you refinance that you should take all the rest of that line item as depreciation immediately, etc. You can, ofc, record the depreciation once taken so the books are accurate, but it's a lousy tool for figuring out what the depreciation should be (or, providing your accountant with the relevant info so they can do it).
What tools is everyone using for this? bonus points if it somehow links to quickbooks so it's easier to keep them aligned.
Alternative question: CPAs - what tools/formats do you prefer your clients to use to give you the information needed, so you can calculate their depreciation?
It depends on what your needs for this tracker are. There are many differences when comparing tax depreciation to book depreciation. If you are tracking depreciation for purposes of repairs and maintenance (like anticipated timing of a new roof for example), you could probably get away with using excel and then just manually booking a journal entry. I don't think it really matters what you record in QB if you need this for taxable income purposes, your accountant is going to make whatever adjustments they need to make anyway.
The only depreciation tracker I use is the fixed asset schedule my accountant provides with my tax return. Then I usually update the financials I keep on hand to align with it accordingly.
I'm a CPA but I don't even file my own taxes so please take my response with a grain of salt.
12 Replies
- Investor · Member since 2024 · 77 posts · 105 votes2y
Quote from @Andrew C.:
I'm using Quickbooks to track overall finances. So I have a FixedAssets account in the chart of accounts, but that's not really usable for tracking the per-item depreciation...there's no entry for when it was placed in use, no way to state depreciation lifetime, nothing that ties loan points to the loan so you notice when you refinance that you should take all the rest of that line item as depreciation immediately, etc. You can, ofc, record the depreciation once taken so the books are accurate, but it's a lousy tool for figuring out what the depreciation should be (or, providing your accountant with the relevant info so they can do it).
What tools is everyone using for this? bonus points if it somehow links to quickbooks so it's easier to keep them aligned.
Alternative question: CPAs - what tools/formats do you prefer your clients to use to give you the information needed, so you can calculate their depreciation?It depends on what your needs for this tracker are. There are many differences when comparing tax depreciation to book depreciation. If you are tracking depreciation for purposes of repairs and maintenance (like anticipated timing of a new roof for example), you could probably get away with using excel and then just manually booking a journal entry. I don't think it really matters what you record in QB if you need this for taxable income purposes, your accountant is going to make whatever adjustments they need to make anyway.
The only depreciation tracker I use is the fixed asset schedule my accountant provides with my tax return. Then I usually update the financials I keep on hand to align with it accordingly.
I'm a CPA but I don't even file my own taxes so please take my response with a grain of salt.
- 2yJake BakerBusiness MemberFlipper/Rehabber · San Diego, CA · Member since 2020 · 1k+ posts · 695 votes
Great question. There are various ways to do this in QBO, but this is how I typically do it for myself and my clients in the Chart of Accounts.
Real Estate Owned
> Land
> Buildings
> Closing Costs
> Capital Improvements
> > CapEx 5 years
> > CapEx 15 years
> > CapEx 27.5 years
> DepreciationOnce the tax return comes in I will adjust for depreciation.
BookkeepingRE - Bookkeeping for Real Estate & Service-Based Businesses58 Reviews - Investor · SE Wisconsin · Member since 2019 · 111 posts · 71 votes2yI must be missing something. How does your CPA determine the depreciation amounts to take? Are they extracting the items to be depreciated from just the FixedAsset schedule? There doesn't seem to be enough information to support that.
If you purchase a property but then spend 4 months rehabbing it before its first occupancy, your depreciation starts from the date it's placed in service (first occupied) not the purchase date. But that information isn't any place in the FA account, so you must be providing it to them some other way?
Likewise, loan points are amortized over the life of the loan and I have them in a separate sub-table of the fixedAssets, but unless they pull up the original journal entry you can't tell which loan they pair with, and it seems like a stretch for the CPA to track down that the loan was refinanced and hence all the remaining depreciation should be taken now. - Investor · SE Wisconsin · Member since 2019 · 111 posts · 71 votes2ydon't you need more information? for buildings, you need the in-service date, right? For closing costs, some amortize with the building (27.5 years) and some with the loan (for my typical RE loan that'd be 5 years straight-line, but ofc if you refi early than it pulls in).
Quote from @Jake Baker:
Great question. There are various ways to do this in QBO, but this is how I typically do it for myself and my clients in the Chart of Accounts.
Real Estate Owned
> Land
> Buildings
> Closing Costs - Investor · Member since 2024 · 77 posts · 105 votes2yYes, you will have to supply your accountant with some documents- closing statement, rehab receipts etc. But when you purchase a property, your basis for deprecation is the cost of the property to YOU (except in the case of a 1031 exchange, the rules are a bit different). Any deprecation expense/recapture for/by the seller prior to the sale is no longer relevant.
Quote from @Andrew C.:
I must be missing something. How does your CPA determine the depreciation amounts to take? Are they extracting the items to be depreciated from just the FixedAsset schedule? There doesn't seem to be enough information to support that.
If you purchase a property but then spend 4 months rehabbing it before its first occupancy, your depreciation starts from the date it's placed in service (first occupied) not the purchase date. But that information isn't any place in the FA account, so you must be providing it to them some other way?
Likewise, loan points are amortized over the life of the loan and I have them in a separate sub-table of the fixedAssets, but unless they pull up the original journal entry you can't tell which loan they pair with, and it seems like a stretch for the CPA to track down that the loan was refinanced and hence all the remaining depreciation should be taken now.
As far as loin points, not sure these are amortized at all for tax purposes. Since you're a cash basis taxpayer, I think the rule is that you can deduct the full amount. Either way, the accountant can pull this easily from the closing statement or 1098 from your lender.
It's really not as complicated as you think. - Investor · SE Wisconsin · Member since 2019 · 111 posts · 71 votes2y
Quote from @Erica Calella:
As far as loin points, not sure these are amortized at all for tax purposes. Since you're a cash basis taxpayer, I think the rule is that you can deduct the full amount. Either way, the accountant can pull this easily from the closing statement or 1098 from your lender.
It's really not as complicated as you think."But when you purchase a property, your basis for deprecation is the cost of the property to YOU"
sure. but the depreciation clock doesn't start when you purchase the property unless it's ready to be rented immediately and in the purchase year it'll be a fractional portion of 1/27.5th, so do to the calculation they'll need to know the in-service date. If you spend 2 months post purchase on rehab, it's not 'in service' till that's done and you don't calculate depreciation from the purchase date, but rather from the in service date. so they'll need more than just the closing docs.
"As far as loin points, not sure these are amortized at all for tax purposes. Since you're a cash basis taxpayer, I think the rule is that you can deduct the full amount."
I am not a CPA, but I'm fairly sure that is not universally true. On a refi, for example, everything I can find suggests it must be amortized over the lifetime of the loan.
It's not that any of this is complicated. I'm just trying to understand what information I need to be tracking in a useful manner so someone else can do it. Hopefully something better than just 'here's the stack of all the receipts for the year...you sort it out, Mr CPA'. - Investor · Member since 2024 · 77 posts · 105 votes2y
Quote from @Andrew C.:
Quote from @Erica Calella:
As far as loin points, not sure these are amortized at all for tax purposes. Since you're a cash basis taxpayer, I think the rule is that you can deduct the full amount. Either way, the accountant can pull this easily from the closing statement or 1098 from your lender.
It's really not as complicated as you think."But when you purchase a property, your basis for deprecation is the cost of the property to YOU"
sure. but the depreciation clock doesn't start when you purchase the property unless it's ready to be rented immediately and in the purchase year it'll be a fractional portion of 1/27.5th, so do to the calculation they'll need to know the in-service date. If you spend 2 months post purchase on rehab, it's not 'in service' till that's done and you don't calculate depreciation from the purchase date, but rather from the in service date. so they'll need more than just the closing docs.
"As far as loin points, not sure these are amortized at all for tax purposes. Since you're a cash basis taxpayer, I think the rule is that you can deduct the full amount."
I am not a CPA, but I'm fairly sure that is not universally true. On a refi, for example, everything I can find suggests it must be amortized over the lifetime of the loan.
It's not that any of this is complicated. I'm just trying to understand what information I need to be tracking in a useful manner so someone else can do it. Hopefully something better than just 'here's the stack of all the receipts for the year...you sort it out, Mr CPA'.Fair points. Your best bet is to consult with your accountant directly so they can explain to you exactly what documents they will need from you.
Good luck!!
- Accountant · 100% Remote · Member since 2019 · 495 posts · 216 votes2y
@Andrew C., we track all the data per each fixed asset in Google Sheets and it's a part of our monthly/yearly processes to input the appropriate adjusting journal entries so the depreciation and amortization are reflected on the financial reports on a monthly basis for each fixed asset.
We have a depreciation worksheet, an amortization worksheet, and another worksheet that details all other aspects of each fixed asset (placed in service date, type of property, partners, etc etc) per client.
It's nothing fancy but it works for us. We keep them up to date on a monthly basis.
When our clients' tax pros file their tax returns, we get a copy and make any necessary adjustments so each client's fixed asset balances match their previous tax returns. We refer to this as reconciling to the previous tax return.
As far as where to get the information to calculate some of these values, most of it can be derived from the closing/settlement documents for the fixed asset.
To calculate depreciation, amortization, etc, you'll dig through IRS publications. Riveting stuff haha.
- 2yMelanie P.Pro MemberRental Property Investor · Member since 2023 · 1k+ posts · 922 votes
Mortgage points are interest expense deductible in the year you pay them for your PRIMARY residence or amortized over the life of the loan for INVESTMENT property. There are additional requirements to consider.
We also depend on our CPA to track depreciation schedules. When there's a new property they take the tax assessor percentage of building/land value and use that to obtain the building value based on our acquisition price. When we buy a roof they see the expense in our income/expense data from Yardi and make the appropriate deduction to depreciate it over the correct time period for that filing year.
- Real Estate Consultant · Chicago, IL · Member since 2024 · 1 post · 0 votes2y
Sage is an outstanding product that is relatively cheap and flexible, if you have a significant portfolio.
- Rental Property Investor · Jacksonville, FL · Member since 2024 · 50 posts · 43 votes2y
Quote from @Andrew C.:
I'm using Quickbooks to track overall finances. So I have a FixedAssets account in the chart of accounts, but that's not really usable for tracking the per-item depreciation...there's no entry for when it was placed in use, no way to state depreciation lifetime, nothing that ties loan points to the loan so you notice when you refinance that you should take all the rest of that line item as depreciation immediately, etc. You can, ofc, record the depreciation once taken so the books are accurate, but it's a lousy tool for figuring out what the depreciation should be (or, providing your accountant with the relevant info so they can do it).
What tools is everyone using for this? bonus points if it somehow links to quickbooks so it's easier to keep them aligned.
Alternative question: CPAs - what tools/formats do you prefer your clients to use to give you the information needed, so you can calculate their depreciation?
I use Stessa for this. One of the reports they have provides a capital expense schedule that includes the total amount, placed in service dates, useful life, name, categories, properties, etc. The only thing it doesn't provide is the depreciation amounts but I just manually calculate and then enter them into the "notes" section. Unfortunately, it doesn't help with the integration with QB but if you've got the amounts set up, you can always create recurring JEs in QB to automatically post the depreciation/amortization expenses as often as you prefer. - Investor · SE Wisconsin · Member since 2019 · 111 posts · 71 votes2y
Quote from @Nelisa Lee:
Quote from @Andrew C.:
I'm using Quickbooks to track overall finances. So I have a FixedAssets account in the chart of accounts, but that's not really usable for tracking the per-item depreciation...there's no entry for when it was placed in use, no way to state depreciation lifetime, nothing that ties loan points to the loan so you notice when you refinance that you should take all the rest of that line item as depreciation immediately, etc. You can, ofc, record the depreciation once taken so the books are accurate, but it's a lousy tool for figuring out what the depreciation should be (or, providing your accountant with the relevant info so they can do it).
What tools is everyone using for this? bonus points if it somehow links to quickbooks so it's easier to keep them aligned.
Alternative question: CPAs - what tools/formats do you prefer your clients to use to give you the information needed, so you can calculate their depreciation?
I use Stessa for this. One of the reports they have provides a capital expense schedule that includes the total amount, placed in service dates, useful life, name, categories, properties, etc. The only thing it doesn't provide is the depreciation amounts but I just manually calculate and then enter them into the "notes" section. Unfortunately, it doesn't help with the integration with QB but if you've got the amounts set up, you can always create recurring JEs in QB to automatically post the depreciation/amortization expenses as often as you prefer.that's interesting. That's pretty much what I ended up doing. I exported it to a SS from Steassa, added columns for the dep lifetime and dep already taken, and went from there.
Getting it back into QB wasn't that difficult, since it's just the aggregate.
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