A new report by Landlord Studio shows that landlords that use software are saving hundreds more at tax time than those that don't - but they could be saving more.
As a landlord, finding ways to save money on your taxes is always welcome news. Landlord Studio’s new report shows that landlords using industry-specific software to track income and expenses and prepare their Schedule E at the end of year are saving as much as 10x in additional deductions compared to those that don’t.
Schedule E is part of form 1040, and used for reporting supplementary income and loss. Learn more here.
The report is based on data collected from over 30,000 US rentals and a survey of more than 500 landlords. The majority of respondents own between 4-10 rental properties and claimed an average of $11,000 in deductions per property each year.
According to the survey, 34% of landlords said they saved over $500 more per property at tax time than they would have without access to software. 40% said they saved $250 more per property. These savings go straight to the bottom line, making a significant impact on a landlord's profitability.
Investors with more units were more aware of the time and financial pain that paper or spreadsheet-based systems can cause and reported saving both more time and money per property than smaller portfolio landlords.
However, there’s potential for landlords to save even more. Only 17% of the surveyed landlords said they track all their mileage, yet 74% said they traveled over 100 miles in the course of the year for a single property and 42% said they traveled more than 500 miles. This means a landlord with 8 properties is missing out on an end-of-year tax deduction of as much as $1,872 per year (at the current mileage rate of 62.5c per mile.
Charles Chan, CEO of Landlord Studio, says that “landlords need to be adopting digital solutions if they want to operate a professional, scalable, and competitive rental business - particularly in an age of high interest and lower yields.”
Of course, it’s not just money that landlords are saving with software. 30% of respondents said they saved more than a week of admin time over the last year with Landlord Studio. These time savings occur in a variety of ways, including automating administrative tasks like tenant screening, rent collection, and maintenance requests, as well as streamlining bookkeeping and tax preparation.
With low prices and significant potential savings, software products like Landlord Studio are game-changing for real estate investors.
"Thankfully, there are a range of software offering solutions for everything from accounting and tax preparation to rent collection," says Charles Chan. "And as these solutions are increasingly affordable, even small-portfolio investors can reclaim the cost of a subscription in a matter of months."
Landlords with three or fewer properties can use Landlord Studio completely for free and can save more than $1,000 a year. For investors with more properties, an annual subscription to Landlord Studio costs as little as $216 and yet can save them more than ten times that in additional tax deductions. Plus, the software cost is itself a deductible expense making this a risk-free investment.