Free guide for landlords · 5-minute read
Close out your rental year before December 31
Six records your tax preparer will ask for, and how to have them ready while the receipts are still in your inbox.
Published 9 November 2026. Checked against IRS Publication 527 (2025 edition). General information, not tax advice.
In January the forms start arriving. In February or March someone asks you for the numbers. Almost everything they will ask for already exists on December 31: it is in your bank account, your email and the glovebox of your car. The work is putting it in one place while you still remember what each payment was for.
These are the six records that come up every year for a long-term rental reported on Schedule E, with what the IRS says about each one.
1. Every rent payment, including the awkward ones
List each payment you received this year, by property and by month. Then look for the three that cause most of the questions.
- Advance rent. The IRS says to include advance rent in income in the year you receive it, whatever period it covers. January's rent that arrives on December 28 belongs to this year.
- Security deposits. A deposit you may have to return is not income. If you keep part or all of it because the tenant broke the lease, the amount you keep is income in that year. A deposit that will be used as the final month's rent counts as advance rent, so it is income when you receive it.
- Rent you never collected. Most individuals use the cash method. Under it you can't deduct unpaid rent as an expense, because it was never counted as income.
2. Every expense you paid, with something that proves it
Most individuals deduct rental expenses in the year they pay them. A bill paid on December 31 belongs to this year; the same bill paid on January 2 belongs to next year.
For each expense keep the evidence the IRS expects to see if a return is examined: a receipt, a canceled check or a bill. Then sort them the way Schedule E lists them: advertising, auto and travel, cleaning and maintenance, commissions, insurance, legal and other professional fees, management fees, mortgage interest, other interest, repairs, supplies, taxes, utilities and other. Depreciation has its own line and its own record (number 4 below).
3. Repairs on one list, improvements on another
Publication 527 says it plainly: separate the costs of repairs and improvements, and keep accurate records. The difference changes when you get the deduction.
- Repairs keep the property in good working condition without adding to its value. Their cost is usually deductible in the year you pay it.
- Improvements are a betterment, a restoration, or an adaptation of the property to a new use. You can't deduct them in one go: they are capitalized and recovered through depreciation.
The line is not always obvious. When in doubt, write down what was done, where and why, keep the invoice, and let your preparer decide. For every improvement note the date it was finished and its full cost. You will need both when you depreciate the property and again when you sell it.
4. The property's basis sheet
This is the page that rarely changes and always gets asked for: the purchase price, the settlement costs, the date the property was placed in service as a rental, and the improvements added since.
Your preparer will also ask how the price splits between land and building. Land is never depreciated, because, in the IRS's words, it generally doesn't wear out, become obsolete, or get used up. The building is: residential rental property is depreciated over 27.5 years under the general system.
Keep this sheet, and everything behind it, for as long as you own the property. The IRS says to keep records relating to property until the period of limitations expires for the year you sell or otherwise dispose of it.
5. The list of statements still to come
Some numbers arrive after the year ends. If you paid $600 or more of mortgage interest on the rental to one lender, you should receive Form 1098. Add the property tax bills, the insurance declarations page and, if you use a property manager, their year-end statement.
Write the list now, one line per property, with who sends each one. In January you will know exactly what you are still waiting for.
6. A log of trips to the property
Driving to the rental to show it, collect rent or fix something can be a deductible expense, using either your actual car costs or the standard mileage rate. Either way, Publication 527 says you need records that follow the rules in chapter 5 of Publication 463: for each trip, the date, where you went, why, and the miles.
You can rebuild the log in March from your calendar and bank statements, but ten minutes in December is easier and more accurate.
How long to keep all of it
The IRS's general rule is three years, with longer periods in some situations. Property records are the exception that matters most to a landlord: keep them until the period of limitations runs out for the year you dispose of the property.
If you would rather not do the sorting by hand
A folder, a pen and an evening do the job. If you prefer a spreadsheet, we make two. The Rental Property Tax Organizer 2026 gives every cost its Schedule E line as you type it, keeps the deposits, mileage and improvements on their own sheets, and ends with one page for your preparer. The Rental Property Spreadsheet logs income and expenses through the year for up to 30 properties.
How this guide was made
Written by CellWorks with help from an AI assistant, then checked against the IRS sources below. The 2026 edition of Publication 527 comes out early in 2027, and the rules can change. This is general information about recordkeeping, not tax advice. CellWorks is not affiliated with the IRS. For your own situation, talk to a qualified tax professional.