Property Manager Fees & Income Tax

[Jessica H.]

Hi everyone,

This is my first year owning a rental property. My property manager shows fees like "posting & processing fees", "software", "showing the unit" in his financial statements. How should I handle these for tax purposes? Should I keep them in my spreadsheet (which I plan to share with my tax preparer)? These fees are in addition to the monthly fee I pay him. Also, I've noticed that the "posting & processing fees" are charged to me and later charged to the tenant so they cancel out.  I am assuming that if the tenant doesn't pay it back, they will stay as an expense to me.

Thanks in advance for your input! :)

Jessica 

[Robert Gilstrap]

@Jessica H.  Your question is a taxation question and the short answer is that pretty much every cent you spend paying the PM to manage your property is an expense that will be written off on your taxes. You should be getting a year end statement from your PM and you can just hand that to your tax preparer instead of you having to keep separate spreadsheets (unless you just want them for yourself).

Some expenses might have to be capitalized vs. being a direct full write off (like a full roof replacement vs. a roof repair) but your tax person can help you with that. Whatever you do don't just blindly assume your tax person knows everything and will act in your best interests. Learn about how real estate taxation works and go over what they are doing because the implications can be major. If you need major tax deductions to offset other income talk to your CPA about component or cost segregation depreciation. If he/she doesn't know what that is then find a new CPA!