Separating rental income and expenses

[Ryan Marker]

My wife and I have owned 1 rental property for the past 5 years. So far I've managed to keep good records and receipts for all transactions relating to the rental. I'm looking into the best method for me to keep the rental property income and expenses separate from my personal accounts to make my life easier at tax time. My main goal is to keep all transactions relating to the rental property separate from personal. This means keeping the security deposit in a separate bank account, tenants depositing rent into a separate bank account, and having the ability to apply for a business credit card to charge house improvements and repairs to. With only one 1 rental property I want to keep it simple. Can I just apply for a EIN # using my name and my SSN # to get a business bank account and business credit card? I live in Illinois and it costs $500 to setup LLC. Applying for an LLC seems overkill at this point, but I don't know if I can just setup an EIN # with my SSN #, and if that is even safe to do. Can someone point me in the right direction?

[Nathan Gesner]

Definitely use separate accounts, whether you have an LLC or not.

Checking: receive rent, pay bills

Savings: hold deposit and reserves for capex, maintenance, taxes, insurance, etc.

When your checking account has more money than is necessary to pay bills, transfer the excess to the Savings account where you can build funds for a new investment. Even better: set up a separate account for new investments so it's not mixed in with reserves for capex, maintenance, taxes, etc.