I am getting everything together for my 2016 taxes and would like to be more organized in 2017. I am curious what tools other hosts use for bookkeeping, tracking expenses, and how frequently you track everything (monthly, quarterly?). Are you just using a spreadsheet, or quickbooks? Any tips on how to organize it and on how to best store the receipts, etc? There is so many more expenses that come with a vacation rental than a traditional rental property, so I’m not sure the best way to organize it over the year.
I use Bankitivity [used to be iBank] which is similar to QuickBooks. I have my chart of accounts set up to mirror the IRS tax forms so that those forms are already done. Basically, I am doing a simplified version of fund accounting with each of our businesses having their own line items. Since we have four businesses plus our personal expenses, we have five ‘funds.’ I can run a report at any time. I enter all expenses and income the day that it occurs. Can’t imagine waiting three months to enter the information, plus I wouldn’t know how much was cash I have in my accounts, whether my expenses are running ahead or behind estimates, or my net income.
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Lord help me, I don’t even know what this means. I just keep a list of my rentals and cleaning fees on a Google spreadsheet and then total it up. Since we live there almost as much as we rent I really don’t keep track of that many expenses. Lawn cutting, cleaning, chimney sweeping, heat, pest control. The big stuff. And then I hand it all to my accountant. I’m a mess, aren’t I? You can say it…
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Do you consider each of 4 different vacation rentals your 4 businesses, or are you talking about 4 separate businesses, vacation rentals being one?
In what format do you store/track business expense receipts? I have some online and others that are paper receipts and I’m not sure the best way long term to organize it all and have it ready for the accountant.
I only rent the rooms in my own home, but if I did have four properties, I would absolutely keep the numbers separated. You have to know the cost basis for all properties upon sale to calculate your capital gains. Then you need to know your cash flow by property in order to know if you are actually making money on them, how much. How can you properly price your properties if you don’t know what they cost you vs the income?
My other businesses have nothing to do with AirBNB.
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As to receipts, there are rules about this. I suggest reading up on this on the IRS website, or paying your accountant to review these rules with you. Bottom line is, you need to have actual receipts for anything you plan to take as a deduction.
In fact, spend the money, and have your accountant set up your accounts for you. There are many advantages to this. Chances are, they know what categories are important, which are capital and which are expenses, and at the end of this, you can simply export your data and s/he can simply import saving you a ton of money each year. What the IRS must have and what you might want are different of course. I like to know how much I spend on cleaning, replenishing the bathroom items, and food. You might want different breakdowns which is when sub accounts can be very useful.
I don’t know if this is the easiest way but it works for me: I keep my receipts in my purse and then at the end of each month I track each item and the amount on a spreadsheet (very basic, eg: towels, $15. Toilet paper, $2. Etc…). Then I shove all the paper receipts in a box file, and all the online ones in a folder in a separate folder in my email account. Then I forget about them unless the taxman asks to see them for an audit. If that happens I will give him the box of receipts, my spreadsheet and the printed out online receipts. I don’t have an accountant. That’s my part done and it’s up to the taxman if he wants to sort through all the receipts and match it all up.
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Follow up question… how do you manage inventory of items?
Just wanted to share this super useful tax guide for Airbnb’s which I just found! It has been really helpful to answer a lot of my tax filing questions.
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@anon67190644 - do you have any tips for separating out categories (capital exp. versus. rental exp.) along with taxes.
For example: You go to Home Depot and purchase a lot of items. Do you make two different transactions in the cashier line: (separate out capital vs. rental exp.)?
And if you do that, when you punch in the number for the different rental categories, do you also separate the taxes? For example, let’s say you make a trip to Sam’s club and purchase food for guests, towels to replace, and other items on the same receipt. They will often times have different tax rates applied. How do you divvy up the total (that includes the total tax)?
Making dinner… will respond later. It isn’t that complicated if you are using accounting software.[Which is tax deductible, if you own a business.]
And how would you go about separating the expenses of 3 different rental properties? I go to Costco and buy 5 packs of toilet paper and distribute them among the 3 places. Would I have to be doing 3 separate transactions for each rental property?
That is good news if the accounting software will separate the transactions along with the correct applicable taxes (from the same receipt). I would imagine I would have to punch in what the prepared food tax is for my state, or the alcohol tax, versus general goods, tax, etc. I have asked this question many times on different forums but never get an actual answer.
Enjoy your dinner 
I just downloaded a trial of Banktivity and wow it looks overwhelming. 
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Quickbooks, Quicken and Bankivity are really just electronic checkbooks. Quickbooks and Bankitivity are an electronic checkbook on steroids. [Quicken is good enough for rental properties IF and only IF you use a Microsoft based computer. The Mac version doesn’t have the needed features and they will never upgrade it to be on par.]
I assume that you have used a paper checking account register. Paper registers are limited. All you can really track is the check number, the vendor paid, your deposit total, and the amount. An electronic register can do so much more. Your “chart of accounts” is just a series of categories:
AirBNB:Expenses:Advertising
AirBNB:Expenses:Legal and Professional
AirBNB:Expenses:Office Expenses:Printing
AirBNB:Expenses:Office Expenses:Publications,
etc.
AirBNB:Expenses:Repairs and Maintenance
AirBNB:Expenses:Supplies
AirBNB:Expenses:Supplies:Consumable - Bathroom
AirBNB:Expenses:Supplies: Consumable - Cleaning
AirBNB:Expenses:Supplies:Consumable - Food
AirBNB:Expenses:Supplies (not in III)
AirBNB:Expenses:Supplies (not in III):BuildOut
AirBNB:Expenses:Supplies (not in III)
When you write a “check” you can have more than one category per check [withdrawal, autopayment]:
Market Basket ( my supermarket )
AirBNB:Expenses:Supplies:Consumable - Food 9.17
Household expense
For any deposit, you can have separate lines for each check enclosed. A simple example with categories:
Deposit 2000.
business_a: inventory vendor_a_refund $1000.00
business_a: Gross Income Taylor $250.00
business_a: Gross Income Smith $750.23
Now, I can run a quarterly report where my refunds and Gross income get their own line. Your expenses are all lined up.
“Checks” work the same way:
Market Basket
AirBNB:Expenses:Supplies:Consumable - Food 9.17
Household expense 38.90
Now with AirBNB, you would organize those lines to mirror either a Schedule C or a Schedule E depending on your circumstances.
If this feels like too much, your accountant could output the structure of the files s/he has been using to do your taxes and you can then import it into any of these three programs.
Once you feel comfortable, you can have your checking, saving, and investment accounts; your credit cards… and all of them now have access to the categories [chart of accounts] that you have created. Getting an accurate income statement, net worth report, or business report now will take about 3 minutes at the most.
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I have the same types of questions as the OP. I’m using Xero. Com accounting software and its overwhelming.
Should I just keep an excel spreadsheet of all expenses and income to keep it simple?
I’m even using an accountant and he asked for an itemized list of everything. Maybe I don’t need to use any software as this is where Im getting stuck. How to categorize certain expenses. I also have 3 airbnb rentals and will just have 3 excel files, one for each unit.
I use waveapps.com and the wave app for things I buy in cash. I take a picture of the receipt and it adds it automatically. I keep track of my freelance expenses the same way. I have a separate checking account for Airbnb and my freelance projects so those payments are set up to automatically go into those accounts. My taxes were very easy for my accountant to understand. He was happy about that.
I have a folder for all receipts that I keep and if I bought something personal I divide the expense. I do this a lot with my Amazon purchases and type in the order number and item in the details section.
I started using You Need A Budget (YNAB) to handle my day to day accounting, and at the end of the year I can export the data into a file for my accountant. It is very user friendly, hooks up to your bank account, and is affordable ($50 per year). So that’s my update. I had to manually count and organize $100,000 worth of receipts this year for taxes and I WON’T be doing that again!!