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Property owners and investors in Savannah, Georgia, are in a hot market today.
Rental prices in Savannah are on the rise, with the price of a one-bedroom jumping by 15% in the span of a year. Addressing your accounting and finances will help you do business better, which means protecting your income stream and serving your tenants.
Rental property accounting becomes simpler when you apply the following tips.
Clarify Rental vs. Personal Use
Before you do anything, make sure that your property is eligible to be considered a rental property, rather than one you live in for personal use.
The Internal Revenue Service (IRS) specifies that you can live in the property no more than 14 days per year for it to still be considered a rental property.
If you live in the property for any longer than 14 days, it is considered a personal use residence. This is the case even if you have tenants and rent collection on and off.
These sorts of distinctions will help you separate your properties in an organized way, so you can more easily manage your real estate portfolio.
Break Down Your Income and Expenses
Get clear on what accounting method you want to use for your real estate investment properties. The two options you have are accrual and cash accounting.
Accrual accounting lets you classify income of all kinds, no matter when it is received. With the cash method, you factor in taxes that you'll take out of every dollar that you earn.
Once you know which method you'll use, keep detailed records of everything, and sync your bank accounts whenever possible. This automates the classification of your income and expenses so that you don't miss anything.
Stay consistent with these accounting rules and practices when you handle your lease renewals, rental property income, tax breaks, and other records.
Know Your Tax Liabilities
There are plenty of things to think about when you need to take care of your tax liabilities. To maintain the best accounting practices, keep all of your tax statements and 1099s so that they're available when you need to reference them.
Familiarize yourself with rules like the 1031 Exchange. This is a type of arrangement that lets you trade a real estate property for another one. By transferring the property instead of selling it, you avoid tax liabilities while still exchanging assets.
Keep Your Accounts Separate
Taking care of your accounting and reporting requires you to have clean bank accounts that you can differentiate between.
You might have sub-accounts for different things like owner disbursements, security deposits, repairs, collected rent, and other payments. A certified accountant can help you choose the right combination of checking, savings, and other accounts so you can classify everything correctly.
Address Your Rental Property Accounting in Savannah
Rental property accounting helps you get the return that you're looking for from your investment and remain tax compliant.
PMI Savannah Metro has the service that you need to address your real estate property accounting situation. For more information, contact us with a message or call 912.680.2225.
