Some of the most well-known duos and combos in the world include bread and butter, peanut butter and jelly, car and driver, and yin and yang.
To this list, a landlord might very well add Stessa and TurboTax. That’s because Stessa and TurboTax work hand in hand to help real estate investors maximize deductions, ensure accuracy, and cimplify filings.
Let’s begin by taking a look at how TurboTax for landlords works, then discuss why so many landlords are using Stessa and TurboTax together for rental property.
- Main options for rental property accounting are worksheet templates, accounting software, property management systems, and TurboTax.
- TurboTax is used by landlords to prepare year-end federal and state income tax returns using rental property data collected throughout the year with Stessa.
- TurboTax also can be used to report rental property depreciation and calculate capital gains tax liability when an investment property is sold.
Rental property accounting options
The best accounting system for rental property should help a landlord maximize profits and minimize taxes by accurately keeping track of income and expenses, assets and liabilities, and owner’s equity and accumulated depreciation.
Investors have 4 main software options for rental property accounting and financial management.
Spreadsheet programs such as Microsoft Excel, Numbers, Google Sheets, and Open Office Calc are a slightly more advanced version of using a handwritten ledger. Almost every computer and smartphone comes with a spreadsheet option or app, and the software is relatively easy to use for tracking basic income and expenses.
There are plenty of online worksheet templates designed for tracking rental property income and expenses, such as the Zillow Rental Income and Expense Worksheet. The template is designed for up to 5 properties or multifamily units and comes with preset editable fields for rental income, other income, operating expenses, and other expenses. Zillow’s worksheet is designed to work with Zillow Rental Manager, although the two programs currently don’t sync.
While creating a worksheet using a spreadsheet program may be a path of least resistance, eventually an investor may discover that income is being incorrectly reported or valuable expenses used to reduce taxable net income are being overlooked due to user error.
Accounting software such as Stessa, QuickBooks, TurboTax, and Wave may be good, inexpensive steps up from using a spreadsheet. However, Stessa is the only one of these options specifically designed for rental property owners.
The other accounting software programs are designed for all types of businesses, so an investor needs to understand how double-entry accounting works and have the time to spend setting up a chart of accounts.
For example, when a rental property is purchased using financing, the home is recorded as an asset on the real estate balance sheet with an offsetting mortgage liability. When the property is rented out and rent payments are received, rent received is credited to a landlord’s bank account and recorded as rental income. Or, when an invoice is paid, the funds are debited from the bank account and charged as an operating expense.
One of the many advantages of using Stessa is that bank and mortgage accounts can be linked and synced so that income and expenses are recorded automatically. The real estate balance sheet on Stessa also keeps track of annual depreciation expense and periodically updates property value to provide a more accurate idea of owner’s equity.
Property management system
A rental property owner looking for a full suite of management tools may find property management software to be a perfect match. In addition to tracking income and expenses, the best property management systems also provide landlord tools to operate a rental property business more efficiently.
For example, property management software such as Avail and Cozy offer options for marketing vacant property, screening tenants and signing a lease, and collecting rent payments and processing maintenance requests entirely online.
Tenant-friendly features make renters happier, which can keep vacancy and turnover costs low and cash flow robust, since satisfied tenants may be more likely to pay the rent on time and treat a rental home as if it were their own.
According to the tenant screening service My Smart Move, scheduling recurring payments, decreasing late rent payments with reminders, and streamlining cash flow are three reasons landlords and tenants like online rent payments.
TurboTax for landlords
TurboTax is touted as America’s #1 brand of tax software for landlords to use for federal and state income tax returns each year. This tax preparation software works with the Windows, Mac, Android, and iOS operating systems and is a direct competitor of companies such as TaxAct and H&R Block Tax Software.
Unlike other accounting software programs such as QuickBooks and FreshBooks, TurboTax doesn’t pretend to offer an all-in-one solution for the rental property business. However, a landlord may find that TurboTax makes tax filing easy by searching for hundreds of deductions and credits for the best tax outcome possible.
How landlords use TurboTax
TurboTax Premier is designed for investments and rental property, whether a landlord has 1 rental property or a portfolio of multiple properties. Pricing is $69 for a federal tax return, with state returns priced at $39 each.
The Premier edition of TurboTax searches for more than 450 potential deductions and can automatically import thousands of financial transactions to save time on data entry. Some of the key features and benefits of TurboTax include:
Rental property owners
- Set up new rentals and determine fair market property value.
- Calculate and report rental depreciation to help minimize taxable net income.
- Import transaction information from hundreds of participating financial institutions.
- Capable of handling over 1,500 transactions, which makes TurboTax perfect for small landlords and investors with multi-property portfolios.
- Calculate capital gains or losses when rental property is sold and the associated tax liability.
- Personalized tips to help realize the best possible tax outcome, even for investors with the complex scenarios.
Personal tax returns
- TurboTax automatically searches for more than 450 deductions and credits to help ensure the biggest refund possible.
- Identifies potential tax deductions of owning a primary residence, including mortgage interest, property taxes, and refinancing fees.
- Ideal for investors with student loans and education expenses to claim every deduction deserved.
- Claim tax credits for dependents such as Child & Dependent Care Credit, Earned Income Credit (EIC), and Child Tax Credit.
- Change in life situation may affect potential tax liabilities, so TurboTax will automatically search for any new deductions or credits to claim.
Customer care & support
- Detailed online guides and FAQs help make it easier to do taxes.
- One-on-one on-demand support available from a TurboTax product specialist to provide customized answers to landlord questions.
- Unlimited access to the TurboTax community for questions about doing taxes or advice on using the software.
- Upgrading to TurboTax Live Premier ($169 for a federal return) provides access to valuable advice from tax experts.
- Receive step-by-step guidance for preparing federal and state income tax returns.
- Get the fastest possible refund by having a deposit made directly into a selected bank account.
- Calculations are guaranteed to be 100% accurate or TurboTax will reimburse for any Internal Revenue Service (IRS) penalties.
- Tax returns from prior years can be imported into TurboTax with a smartphone.
- Automatically import information from over 1 million companies or upload a photo of a W-2 to get a quick start.
- Information from a federal return is transferred to help you finish a state return more quickly.
Why TurboTax and Stessa go hand in hand
Stessa and TurboTax work together to help real estate investors minimize taxes through smart money management, automated income and expense tracking, and online tax preparation and filing. In turn, this enables investors to maximize their profits.
After signing up for a free Stessa account, enter the address of each rental property, connect business bank accounts and mortgage accounts, then track rental performance in real time on the owner’s dashboard. Income and expenses for each property are automatically synced and posted to the correct account, helping to eliminate worries about underreporting income or double booking expenses.
Throughout the year, financial performance reports such as income statements, net cash flow, and capital expense reports can be generated with just one click. Stessa’s real estate balance sheet automatically keeps track of property cost basis and depreciation and periodically updates property values to provide a more accurate idea of owner’s equity.
At the end of the year, the Stessa Tax Center helps make tax season a breeze. Investors receive a variety of benefits, including a personalized tax package, a suite of tax resources created in partnership with The Real Estate CPA, and a TurboTax discount exclusively for members of the Stessa community.