H&R Block has become one of the most recognized names in the tax preparation business. The company operates around 12,000 retail tax offices in the U.S., Canada, and Australia and, since its launch, has prepared more than 800 million tax returns worldwide. The company offers numerous products for tax preparation, including H&R Block Basic Tax Software, H&R Block Deluxe Tax Software, H&R Block Premium Tax Software and H&R Block Premium & Business Tax Software.
Today, Stessa and H&R Block Premium Tax Software can be used together to help real estate investors accurately report income and expenses, maximize deductions, and simplify tax filings.
Let’s look at how H&R Block Premium Tax Software works and discuss why so many real estate investors are using both Stessa and H&R Block Premium for rental property.
- The main accounting options for rental property are spreadsheets, accounting software, property management systems, and tax preparation software like H&R Block Tax Software.
- H&R Block is touted as the world’s leader in tax preparation services. Landlords often use H&R Block Premium to prepare Schedule E for income and loss from rental real estate, including depreciation expense.
- Stessa is used by landlords to track income and expenses throughout the year and to prepare a personalized tax package, providing data that can be used for H&R Block Premium.
Accounting options for rental property
The ideal accounting setup for rental property helps investors accurately track income, expenses, assets, and liabilities, and claim every possible real estate tax deduction to maximize profits and minimize taxes.
There are 4 main options for rental property accounting and financial management.
A spreadsheet is often the go-to option for investors with one or 2 rental properties, and understandably so. Spreadsheet programs such as Excel, Numbers, Sheets, and OpenOffice Calc are found on nearly every computing device. They are relatively easy to use, and investors don’t have to spend the time creating a spreadsheet to track rental property.
There are also plenty of online income and expense worksheets that can be downloaded for free and come with preset editable fields for rental income, operating expenses, and owner expenses.
However, there are also drawbacks to using a spreadsheet for rental property to consider. For example, spreadsheets can be prone to accidental errors by using the wrong formula or making a “fat finger” mistake by incorrectly entering data. Also, spreadsheets may not be secure and can be notoriously difficult to scale or edit as more properties are added and tenants come and go.
At the end of the day, while using a spreadsheet for rental property may be the path of least resistance, an investor may eventually learn the hard way that income or expenses are incorrectly entered and valuable deductions to reduce pretax income are entirely overlooked.
Accounting software programs like Stessa, QuickBooks, H&R Block, TaxAct, and Wave are good, inexpensive alternatives to spreadsheets. However, of these 5 options, Stessa is the only accounting software specifically designed for real estate investors.
While it might be tempting to purchase generic accounting software for business and personal use, doing so can create buyer’s remorse. General-purpose software can be used for rental property, but time will be required to create a chart of accounts with the correct line items for income, expenses, assets, and liabilities. Knowledge of double-entry accounting is also required to ensure that the books balance at the end of each period.
Double-entry accounting is relatively simple, but putting it into practice may be a different story. To illustrate, assume an investor purchases a single-family rental (SFR) for $120,000 using a 30-year loan with an interest rate of 6% and a monthly mortgage payment of $539 principal and interest (P&I).
To record the purchase, the property purchase price is recorded as an asset on the real estate balance sheet, and the loan balance is booked as a liability.
Each time a mortgage payment is made, the checking account is reduced by the total payment, mortgage interest is recorded as a deductible expense on the P&L statement , while the principal part of the payment reduces the outstanding mortgage balance on the real estate balance sheet.
When tenant rent payments are received, the checking account balance on the real estate balance sheet is increased and the rent is recorded as income on the P&L. As operating expenses are paid throughout the month, the checking account balance is reduced, and the payment is recorded to the appropriate expense line item on the P&L.
One of the many benefits of signing up for a free Stessa account is automating income, expenses, assets, and liabilities.
After entering basic property information and linking bank and mortgage accounts, performance statistics are automatically updated in real time and monitored from the convenient, comprehensive online owner’s dashboard.
Stessa also periodically updates property values to provide a better idea of owner’s equity and calculate depreciation expense to report on Schedule E (Form 1040) to reduce pretax income.
Property management system
Rental property financial management systems such as Stessa, Buildium, Rentec Direct, and Tenant Cloud are good options to consider for investors looking for an all-inclusive solution. Rental property financial software automatically tracks income and expenses, keeps the real estate balance sheet up to date, and may provide tools and services to streamline a rental property business.
For example, some property management systems have modules for creating a property website and syndicating listings to popular rental listing platforms such as Apartments.com, Realtor.com, Zillow, and Zumper. In addition, an online rent collection tool helps landlords keep cash flow robust and tenants more satisfied with various payment options.
According to the tenant screening service My Smart Move, scheduling recurring rent payments, reducing late fees with autoreminders, and streamlining cash flow are 3 reasons landlords and tenants use online rent payment systems.
In January 2022, Stessa was ranked as the best accounting software for landlords by Landlord Gurus. This website provides advice on crucial issues landlords and property managers face. Stessa was ranked as the best landlord software based on key criteria, including income and expense tracking, financial reporting, tax preparation, and cost.
H&R Block Premium
H&R Block Tax Software is advertised as helping taxpayers to get every credit and deduction they deserve, with both DIY options and filing with a tax pro. The company provides various tax reporting options for individuals, families, and self-employed people, including real estate investors.
H&R Block is laser-focused on tax preparation products and services, unlike some accounting software solutions that try to be all things to all people. After answering a few simple questions, taxpayers receive step-by-step guidance for doing their own tax preparation.
How to use H&R Block’s software
H&R Block offers 4 plans for people who wish to do their own taxes:
- Free Online: $0 federal return + $0 per state return filed for simple returns
- Deluxe Online: $54.99 +$44.99 per state filed for itemizing deductions and child and dependent care expenses
- Premium Online: $74.99 + $44.99 per state filed for rental income, investments, and sold cryptocurrency
- Self-Employed Online: $114.99 + $44.99 per state filed for contractors and gig workers, asset depreciation, and home office expenses
H&R Block recommends Premium for taxpayers who own rental properties, which means the fees to file taxes online would be $119.98 for one federal and one state return. However, investors who own rental property in a different state from their primary residence may also be required to file a return with the state the rental property is in.
The above H&R Block pricing is as of April 2022. Pricing may vary..
Features of Premium
- Calculate Earned Income Tax Credit (EITC)
- Calculate Child Tax Credit (CTC)
- Deduct student tuition, payments, and loan interest
- Report retirement income
- Digitally organize tax documents for up to 6 years
- Access to live phone or chat tech support
- Have a health savings account (HSA)
- Deduct real estate taxes and home mortgage interest
- Organize contract, freelancing, gig work, and other self-employed income
- Report stocks, bonds, and other investment income (Schedule D)
- Report cryptocurrency sales
- Claim rental income and deductions (Schedule E)
Why landlords use Stessa and H&R Block tax software
Stessa and H&R Block Tax Software go hand in hand by helping real estate investors to reduce taxes through automated income and expense tracking, smart money management, and tax preparation and filing. Using both services helps investors to maximize potential profits by minimizing taxes.
After signing up for a free Stessa account, enter the address of each rental property, connect business bank accounts and mortgage accounts, and begin tracking rental performance in real time on the comprehensive online owner’s dashboard.
Income and expenses are automatically synced and posted to the correct account and property, helping to reduce the risk of erroneously reporting income or expenses. The Stessa real estate balance sheet keeps track of rental property depreciation and cost basis. It periodically updates property values to provide a better idea of owner’s equity throughout the year.
When tax season rolls around, the Stessa Tax Center can make tax reporting a breeze by providing a personalized tax package, including an income statement, net cash flow report, and a ZIP file in a single email. Data included in the Stessa Tax Package is used to complete Schedule E (Form 1040) with H&R Block Premium to report rental property income and loss, including depreciation expense.