Azibo allows for easy transaction categorization according to schedule E tax categories. Schedule E is used to report income or loss from rental real estate, here is a quick guide for how to use these categories. Azibo also allows you to assign a transaction to a property making for easy tax preparation.
Advertising -- If you take out a classified ad in a newspaper or purchase signs at your local home improvement store for the purpose of advertising your property to tenants, you'd list it as an advertising expense.
Auto and travel -- You can deduct expenses incurred when traveling to and from your rental properties. The current IRS mileage rate is around $0.58 per mile, so be sure to log the trips you take to your properties. (Note: You have the choice between deducting your actual automobile expenses or using this standard rate, but in the majority of cases the standard rate is easier as well as more financially beneficial.)
Cleaning and maintenance -- If you pay for lawn service or pest control at your rental properties, these are examples of expenses you would report on this line.
Commissions -- If you pay commissions to anybody, these can be expensed here. This does not include commissions you pay to a real estate agent when buying a property.
Insurance -- This includes your insurance expenses for your rental properties.
Legal and other professional fees -- Aside from the obvious, this also includes any fees for tax advice or any tax preparation fees incurred in connection to your rental properties.
Management fees -- If you hire a property manager to oversee the day-to-day operations of your rental properties, their management fees can be deducted from your taxable rental income.
Mortgage interest paid to banks, etc. -- Unlike with your residence, you can deduct mortgage interest paid on rental properties no matter how large your loan balance is. You should receive an annual mortgage interest statement from your lender that tells your deductible amount.
Other interest -- This includes interest paid on any non-mortgage debt, as well as any mortgage debt owed to non-bank lenders. A good rule of thumb is that if you don't receive a Form 1098 mortgage interest statement, report this interest on the "other interest" line.
Repairs -- If you say, repair a broken window or patch a hole in the roof, you can report the expense here. However, you cannot list the cost of any improvements, such as buying new energy-efficiency windows for the entire home or putting a new roof on the building. These must be capitalized (added to your cost basis) and depreciated over time, which we'll discuss later.
Supplies -- This is a broad category and can refer to office equipment you purchase to help manage your rental properties or any other supplies you use exclusively for your rental real estate activities. For example, if you self-manage your properties and buy a toolset to keep in your car for the purpose of making repairs to your properties, it can be a deductible supplies expense.
Taxes -- When you pay your local property taxes on your rentals, you can use that expense to help offset your taxable rental income.
Utilities -- If you pay any of the utilities (such as water or sewer) at any of your rental properties, you can deduct those expenses here. This category can also include the cost of "ordinary and necessary" telephone calls related to your rental properties.
Depreciation expense or depletion -- We won't get too deep into depreciation here (check out our thorough guide to rental property depreciation), but the short version is that rental property owners can deduct the acquisition cost of the building itself as well as any capital improvements over a period of time -- 27.5 years for residential properties. When you calculate your annual depreciation deduction, you list it on this line on Schedule E.
Other -- If you have any other expenses related to owning, maintaining, and/or managing your rental property, list them on this line. However, if you aren't 100% sure something is deductible, it's wise to seek help from a qualified tax professional.