Rental Tax Items Owners Should Review with a CPA

Cash flow on a statement is not taxable income, and taxable income is not cash flow. Owners mix them up when a repair and a renovation land in the same month. We send the records. Your CPA decides the treatment.

This is general information from a Round Rock property manager, not legal, tax, or financial advice. Texas rules change. Use a Texas attorney or CPA for your property, and call our office if we manage the house.

Items owners commonly take to their preparer

• Mortgage interest, property tax, and insurance
• Management fees and leasing fees
• Repairs that keep the house as it was, versus improvements that change it
• Utilities you paid during a vacancy
• Mileage or travel your preparer is willing to support with a log
• Depreciation, which is a paper expense and not money in the account

Our accounting page describes the monthly statement. It is not a tax return.

Cash in the account is not the tax return

A repair and a renovation can land in the same month and feel identical on a bank statement. They are not identical to a preparer. A repair keeps the house as it was: a water heater that failed, a leaking supply line, a broken latch. An improvement changes the house: a new roof system when the old one was at the end of its life and you upgraded it, a remodel, an addition. We do not decide which is which. We send the invoice with a description of the work. Your CPA decides the treatment, including whether something is deducted now or recovered over time.

Management fees and leasing fees are on the owner statement as their own lines. The management fee is 10% of collected rent. A vacant month shows no management fee, which also means the rent was not collected. Utilities you paid during that vacancy, insurance, property tax, and mortgage interest are items owners commonly take to a preparer. Mileage and travel only help if your preparer will stand behind a log. Depreciation is a paper expense. It can lower taxable income without putting money back in the operating account, which is why cash flow and taxable income diverge.

What we will not do is publish a list of deductions and tell you they apply to your house. Rules change, and your facts matter: whether you live in the house part of the year, whether you placed it in service, whether a cost is a repair. The monthly statement and the year-end documents in the AppFolio owner portal are the package to hand over. Read the accounting page for what that package contains. Then talk to a CPA. If we manage the house and a line looks wrong, call the office and we will match it to an invoice.