When managing rental properties, house maintenance is a significant expense that requires careful accounting. Proper accounting helps in budgeting and forecasting future expenses, ensuring you set aside adequate reserves for maintenance. Accurate accounting maximizes tax deductions, reducing taxable income and increasing profitability.
82% of home buyers regret their recent property purchase, according to a survey from Clever Real Estate. The most common regret: buying a home that requires too much maintenance.
28% of buyers were shocked by the cost and time needed for upkeep. About one-third blamed the seller for not being upfront about maintenance requirements. The second most common regret, cited by 24% of buyers, was that the home did not meet all their needs.
For single- and multi-family homes, landlords are typically responsible for a wide range of maintenance tasks. These can include:
Regular mowing, fertilizing, and landscaping.
Clearing driveways and walkways during winter.
Cleaning and repairs. E.g. pool may require chemical balancing.
Fixing plumbing, electrical issues, and structural repairs.
Use accounting software to track all maintenance expenses. Categorize them under specific headings like “Lawn Care”, “Snow Removal”, etc. Keep detailed records of all receipts and invoices. This documentation is essential for tax deductions.
Some maintenance costs can be capitalized and depreciated over time. For example, significant repairs that extend the property’s life can be depreciated under IRS Pub. 527, “Residential Rental Property” guidelines and IRC §263.
Routine maintenance costs are generally deductible in the year they are incurred. This includes lawn care, snow removal, and minor repairs.
In condos and townhomes, many maintenance responsibilities fall under the Homeowners Association (HOA). The HOA typically covers:
Roof repairs, exterior painting, and common area upkeep.
Lawn care and snow removal for common areas.
Pool, gym, and other shared facilities.
Record HOA fees as a separate expense category. These fees often cover many maintenance costs. Generally, HOA fees are deductible as a rental expense ( IRS Pub. 530). Occasionally, HOAs levy special assessments for major repairs or improvements. These should be accounted for separately and may need to be capitalized.
Research by the National Association of Realtors (NAR) indicates that maintenance costs can range from 1% to 4% of the property’s value annually. Proper accounting ensures these costs are managed effectively.