Does my Schedule E look like yours? Ma and Pop landlords

Question

Due to a discussion about filing form 3115, which is evidently required but may not be expected to be complied with, I thought I'd ask if my Schedule E looked normal. (No red flags) First, can anyone link to an article talking about a typical ma and pop landlord schedule e?

Poll?

Do you typically have maintenance and repairs at 5-8-10% of annual rents? (Steve Crossland's PM blog tells his investors to plan on 10-12% of rents per year, but I feel sure he in averaging in roof & hvac over a decade...and maybe carpet over 5 years, which is becoming rather passe.)

Include lawn service? Pest? Provide filters? Filed under maintenance?

Do you manage yourself, and if so how many miles do you write off? Or in dollars, either.

Do you make money after expenses and depreciation? On every property? If not, what market?

Please feel free to add questions.

I actually have my schedule e done but i am not at home...which is why I am leisurely blogging:-). I have no numbers. I use the 10-12% of annual rents to gauge whether my repairs and maintenance seem reasonable and I always claim less. I also try to keep maintenance less than repairs...it is so grey of an area, I just kind of guess. Because I assume there is some kind of IRS algorithm matching zip codes and expense ratios etc and if I think one category looks heavy, I move something. For example, $75 in pickets spread out over a large backyard is maintenance but concentrated on one side where the neighbor's pit bull repeatedly throws himself is a repair. I have no idea what an audit red flag is, but on rentals I will assume most sfr landlords repair but rarely spend large amounts maintaining.

And I claim no management expenses, but my car expenses can be hundreds per property...so I guess that makes sense. I do make weekly trips to water new trees over the summer.

I provide filters for tenants and personally spray once or twice a year and write off the chemicals. I do my house and the in-laws at the same time.

And I have positive cash flow, used to not on the property with flood insurance...$1700 premium this year.

Marcia Maynard · Answer

We are a "mom & pop" operation with 15 residential rental units. We keep accurate records of income and expenses in Quicken. Our taxes are prepared by a qualified tax professional (an EA - Enrolled Agent) who understands the ins and outs about rental property. He keeps track of our depreciation schedules and also guides us on what can and can not be deducted. We try to "lose" money on paper, but gain money in our bank accounts for our rental property business. He asks us for our mileage related to servicing our properties and we get a deduction for that, so we do keep track of the trips we make to the properties and to stores.

My husband and I run our rental property business under two LLC partnerships, he and I also have W-2 income and Self Employment income from other professional work. Here is a list of key forms that we filed for tax year 2013 with the IRS:

Form 1040 (U.S. Individual Income Tax Return) married filing jointly

Schedule C (Profit or Loss from Business)

Schedule E (Supplemental Income and Loss)

Schedule SE (Self Employment Tax)

Schedule 8949 (Sale and Other Disposition of Capital Assets)

Form 2106 (Employee Business Expense)

Form 8829 (Expenses for Business Use of Your Home)

Form 4562 (Depreciation & Amortization) non-rental property

Form 8582 (Passive Activity Loss Limitations)

From our Partnership Return:

Form 1065 (U.S. Return of Partnership Income)

Form 4562 (Depreciation & Amortization) rental property

Form 8825 (Depreciation Detail - one for each property)

Note, we've used a Cash Accounting Method (not Accrual) since the beginning and use GAAP (Generally Accepted Accounting Principles), so we haven't filed Form 3115 (Change in Accounting Method).

I hope that helps. In answer to your questions about Schedule E... we set up our accounting categories to match those of Schedule E to make reporting easy. We account for anything that is income and anything that is an expense. We have a clear paper trail by using bank accounts and credit cards, separate ones for our business vs. personal.

Does my Schedule E look like yours? Ma and Pop landlords

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