Set up books for a rental property before your first tax year closes
A first full year of rental books closed cleanly: purchase price allocated between land and building, a placed-in-service date documented, a depreciation schedule computed, every repair-versus-improvement call recorded with its reasoning, and a Schedule E per property that reconciles to the bank.
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Who it's for
First-time and accidental U.S. landlords with one to three residential units — including people renting out a home they moved out of or inherited — who are heading into their first full tax year as a landlord and want to keep their own books instead of paying for a subscription bookkeeping service.
About this playbook
This guide walks you through setting up complete, tax-ready books for your first residential rental property — from opening the right bank account to handing a clean Schedule E package to your preparer. You will capitalize the purchase price using the county assessor’s land-to-building ratio, apply the 27.5-year straight-line depreciation under the mid-month convention, and classify every expense as repair or improvement with documented reasoning in a decision log. It covers security deposit handling as a liability, the de minimis safe harbor election for tangible property under $2,500, and the contractor 1099-NEC threshold you need to track from day one. What it does not cover: property management software setup, multi-member LLC or partnership accounting, or state-specific tax forms beyond Schedule E. By the end you will have property-level books that a CPA can file without rebuilding.
What you'll do, step by step
Free preview — these steps are open to read in full before you buy.
Phase 1: Set up your bookkeeping structure
0/4Establish the bank account, accounting method, and chart of accounts that your rental books will live in, along with a record-keeping system that survives an audit.
- 1 hour
- 20 min
- 45 min
- 30 min
Phase 2: Capitalize the purchase price
5 stepsPhase 3: Classify every expense against the tax rules
5 stepsPhase 4: Reconcile cash and track liabilities
3 stepsPhase 5: Close the tax year and prepare Schedule E data
4 stepsDetails
What you need first
You own or have closed on a residential rental property in the United States. You have a Social Security Number or EIN for tax reporting. You have a signed lease and at least one rent payment received or scheduled. You have kept the closing disclosure, settlement statement, all receipts for property expenses, and bank statements since the closing date.
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About the creator
Playbooks about savings and long-term investing, written to be ticked off: what to prepare, what to do, in what order.
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