Rental property bookkeeping for taxes: a complete guide

Tax season arrives, and you realize your rent payment records are scattered everywhere—some in a notebook, some in text messages, some only in your memory. The result? Hours spent reconstructing income data that should have been organized from the start.

Compare that with a landlord who records every payment consistently throughout the year. When tax time comes, the income data is ready—just calculate and file.

This article isn’t about general financial reporting (for that, read how to create clean financial reports for your rental property). This article focuses specifically on bookkeeping for tax compliance—what records to keep, what tax obligations apply, what deductions are available, and how the filing process works.

While tax rules vary by country, the principles of good record-keeping are universal. We’ll use concrete examples from Indonesian and US tax systems to illustrate key concepts.

This article is for general informational purposes and does not constitute professional tax advice. Tax regulations may change. Consult a tax professional for your specific situation.

Clean income records start with proper recording. Try Kamaru free—record all rent payments in one app. Setup takes just 5 minutes.

Tax obligations for rental property owners

Before getting into bookkeeping specifics, you need to understand the tax obligations that apply to rental income. Many landlords don’t realize their rental income is taxable—or know it but aren’t sure how to calculate and report it.

Income tax on rental income

Rental income is taxable in virtually every country. How it’s taxed varies:

Indonesia: Rental income from buildings is subject to a final income tax (PPh 4(2)) at a flat 10% of gross income. No deductions are allowed against this tax.
United States: Rental income is reported on Schedule E (Form 1040) and taxed at your marginal income tax rate. Operating expenses can be deducted from rental income before calculating tax.
Other countries: Most have similar systems where rental income is declared on your annual tax return. Check with your local tax authority for specific rules.

Regardless of the system, the starting point is the same: you need an accurate record of total rental income received.

Property tax

Beyond income tax, property owners typically pay annual property taxes based on the assessed value of the property. This is a separate obligation from income tax and applies whether or not you rent out the property.

Filing deadlines

Key deadlines to remember:

Indonesia: Monthly tax payment by the 15th of the following month. Annual tax return (SPT) by March 31.
United States: Annual tax return by April 15. Quarterly estimated tax payments may be required if you expect to owe $1,000 or more.
Other countries: Check with your local tax authority for specific deadlines.

Consequences of non-compliance

Failing to report or pay rental income tax can result in:

Late filing penalties and interest on unpaid taxes
Tax audits that can result in additional assessments
In serious cases, criminal penalties

The good news is that avoiding all of this is straightforward—as long as you have clean income records and consistently pay and report taxes on time.

Essential records to keep for taxes

Proper bookkeeping starts with knowing which documents you need to maintain. Here are the records you must keep for tax purposes.

Proof of rental income

This is the most important category. You must be able to prove how much total rental income you received in a given tax period. Keep:

Bank transfer records for every incoming rent payment
Cash payment logs with date, amount, and tenant name
Monthly payment summaries listing all tenants and amounts paid

Without this proof, you’ll struggle to calculate taxes accurately—potentially underpaying (risk of penalties) or overpaying (wasted money).

For practical payment tracking methods, read how to track rent payments: 3 easy methods.

Proof of deductible expenses

In many countries (notably the US), operating expenses directly reduce your taxable rental income. Keep receipts for:

Repairs and maintenance (plumbing, painting, appliance fixes)
Utilities for common areas (electricity, water, internet)
Insurance premiums for the property
Property management fees
Professional services (accountant, lawyer, property inspector)
Mortgage interest payments (a significant deduction in the US)

Note: In Indonesia’s flat 10% final tax system, expense deductions don’t apply to the rental income tax itself. However, maintaining expense records is still valuable for understanding your true profit and for documentation purposes.

Lease agreements and tenant documents

Supporting documents that strengthen your income records:

Lease agreements showing rental rates and terms
Tenant identification records (government ID copies)
Check-in and check-out records with clear dates

These documents prove that the income you report corresponds to actual tenants occupying your property. For a guide on managing tenant documentation, read the complete guide to managing rental properties with Kamaru.

How long should records be kept

Record retention requirements vary by jurisdiction:

Indonesia: At least 10 years after the end of the relevant tax year (per the General Tax Provisions Act)
United States: The IRS recommends keeping records for at least 3 years from the date you filed your return, or 7 years if you claim a loss from worthless securities or bad debt deduction. For property records, keep them until the period of limitations expires for the year you dispose of the property.
General recommendation: Keep records for at least 7 years to be safe. Store digital copies to protect against physical damage or loss.

For more information on IRS retention guidelines, see how long should I keep records.

Every payment you record in Kamaru is stored neatly with date, amount, and tenant name—the data you need when tax season arrives. See how payment tracking works.

How to organize rental bookkeeping for taxes

Now that you know what records to keep, here’s how to set up a system that makes tax reporting painless.

Separate personal and business accounts

The most fundamental step, yet frequently ignored. If all rent payments flow into your personal account alongside your salary and daily spending, separating rental income becomes an exhausting task—especially at tax time.

Open a separate bank account for your rental business. All rent payments go into this account, and all operating expenses are paid from this account. For a more detailed explanation, read how to create clean financial reports for your rental property.

Set up an income recording system

Every incoming rent payment should be recorded with the following information:

Date of payment
Tenant name and unit number
Amount paid
Payment method (cash, bank transfer, QR code)
Period covered (e.g., “February 2026 rent”)

Important: security deposits are not income. Don’t record them as taxable revenue. Deposits only become income when withheld for damages or not returned due to a lease violation.

For practical tracking methods, read how to track rent payments.

Record expenses consistently

Even if your tax system doesn’t allow deductions against rental income (like Indonesia’s final tax), tracking expenses is essential for knowing your actual profit. Without expense data, you know gross income but have no idea how much is truly yours.

Use a spreadsheet or separate accounting app for expense tracking. Categorize by type:

Routine maintenance (cleaning, HVAC servicing, etc.)
Repairs (plumbing leaks, repainting, etc.)
Utilities (electricity, water, internet for common areas)
Administrative (bank fees, property tax, etc.)

Monthly reconciliation

At the end of each month, take time to compare your payment records against your bank statements. Verify that:

All incoming payments in the bank are recorded in your system
No recorded payments are missing from the bank
Recorded totals match bank totals

This process catches errors early—better to discover a $500 discrepancy in February than in December when preparing your tax return. For a full reconciliation guide, read how to create clean financial reports.

Tax deductions for rental property owners

One of the most common questions from landlords: “Can I deduct repair and maintenance costs from my taxes?” The answer depends on your country’s tax system.

Understanding deductible expenses

Tax treatment of rental expenses varies significantly:

Countries with deduction systems (US, UK, Australia, etc.):

In the United States, you can deduct a wide range of operating expenses from rental income before calculating tax. Common deductions include:

Mortgage interest — often the largest deduction
Property depreciation — you can depreciate the cost of the building (not land) over time
Repairs and maintenance — ordinary repairs are fully deductible in the year incurred
Insurance premiums — property and liability insurance
Property management fees — including software subscriptions
Travel expenses — related to property management activities
Professional services — accountant, lawyer, property inspector fees

Countries with final/flat tax systems (Indonesia):

Under Indonesia’s PPh 4(2) final tax, the 10% rate applies to gross income with no deductions allowed. Repair costs, maintenance, insurance—none of these reduce the tax amount. The simplicity is the trade-off: easy calculation but no way to lower your tax burden through expense management.

If you operate through a business entity, different rules may apply. Consult a tax professional for portfolios where this could matter.

Repairs vs. capital improvements

This distinction matters in countries where deductions are allowed:

Repairs restore the property to its current condition. Examples: fixing a leaky pipe, replacing a broken lock, repainting a room. In the US, repairs are immediately deductible in the year incurred.
Capital improvements add value or extend the property’s useful life. Examples: adding a bathroom, installing new HVAC, building an extension. In the US, these must be depreciated over time, not deducted immediately.

Classifying an expense incorrectly can trigger issues during an audit. When in doubt, consult a tax professional.

Asset depreciation

In the US, residential rental property can be depreciated over 27.5 years using the Modified Accelerated Cost Recovery System (MACRS). This means you can deduct a portion of the building’s cost each year, significantly reducing taxable rental income.

For example, a building purchased for $275,000 (excluding land value) would generate a depreciation deduction of about $10,000 per year for 27.5 years.

Other countries have similar depreciation systems with different timeframes. Check with your local tax authority or accountant for specific rules.

Knowing your total income per period is the first step in calculating your tax obligation. Use Kamaru to view your rental income summary—see the financial report feature.

How to file rental income taxes

Now for the part many landlords dread most: the actual filing process. The good news is that if your bookkeeping is in order, filing is fairly straightforward.

Step-by-step filing process

The general process for filing rental income taxes:

Gather all income records — total rent received per property, per period
Calculate total rental income — sum all payments received during the tax year
Deduct allowable expenses (where applicable) — subtract operating costs from gross income
Complete your tax return — in the US, report rental income on Schedule E (Form 1040); in Indonesia, report under “income subject to final tax” in your SPT Tahunan
Pay any tax owed — by the filing deadline
Keep copies of your filed return and all supporting documents

Example tax calculations

Indonesia (PPh 4(2) final tax):

Item	Amount
Number of units	10
Rent per unit/month	Rp 1,500,000 (~$95)
Occupancy rate	100%
Gross monthly income	Rp 15,000,000
Monthly tax (10%)	Rp 1,500,000
Annual gross income	Rp 180,000,000
Annual tax	Rp 18,000,000

Simple: gross income x 10%. No deductions.

United States (Schedule E):

Item	Amount
Annual gross rental income	$24,000
Less: mortgage interest	-$8,000
Less: depreciation	-$5,000
Less: repairs & maintenance	-$2,000
Less: insurance	-$1,200
Less: property management	-$600
Net rental income	$7,200
Tax (at 22% marginal rate)	$1,584

The deductions significantly reduce the taxable amount. This is why keeping detailed expense records is crucial in countries that allow deductions.

Documents to prepare for filing

When completing your tax return, have ready:

Income summary — total rental income per property, per period
Proof of tax payments already made (estimated payments, withholdings)
Expense receipts and totals organized by category (where deductions apply)
Lease agreements for reference
Tax identification number (NPWP in Indonesia, SSN/EIN in the US)

If you use Kamaru, the financial report feature shows total income per period—data you can use directly for your tax calculations.

Common tax bookkeeping mistakes landlords make

Avoid these mistakes to keep your tax reporting smooth and accurate.

Failing to record cash payments

Cash payments leave no automatic trail. If a tenant pays cash and you don’t record it, your income figures will be inaccurate when calculating taxes. You might underreport (legal risk if audited) or overreport (paying more tax than you owe).

Solution: Record every cash payment immediately after receiving it. Better yet, encourage tenants to switch to digital payments. Read how to set up QR code payments to reduce cash transactions.

Mixing personal and business finances

When all money flows into one account, separating rental income from other income becomes exhausting—especially at tax time. It also makes it harder to prove your figures if audited.

Solution: Use a separate bank account for your rental business. For more common mistakes, read 10 fatal mistakes landlords make.

Treating deposits as taxable income

Security deposits received from tenants are not income as long as they’re expected to be returned. Deposits only become income when:

Withheld for property damage
Not returned due to lease violations
Applied to cover unpaid rent

If you record all deposits as income, you’ll pay more tax than you should.

Not keeping expense receipts

In countries where deductions are allowed (like the US), missing receipts mean missing deductions—directly costing you money. A $2,000 repair you can’t document is a $2,000 deduction you can’t claim.

Even in flat-tax systems, expense records protect you during audits and help you understand your true profit margin.

Solution: Keep every receipt. Photograph them with your phone and store in a digital folder organized by month.

Waiting until year-end to do bookkeeping

Reconstructing 12 months of transactions at once is a recipe for errors. Payment details from 8 months ago are forgotten, bank transfer records may have expired in your app, and you end up with estimates—not accurate figures.

Solution: Spend 15-30 minutes each week updating your records. It’s far easier to log 5-10 transactions per week than 200+ at year-end.

Don’t wait until year-end to organize your payment records. Start recording every rent payment in Kamaru now—your income data is ready whenever you need it. Setup takes just 5 minutes, no credit card required.

Frequently asked questions

Do all rental property owners need to pay taxes on rental income?

In most countries, yes. In Indonesia, rental income is subject to a 10% final tax with no minimum threshold—even renting out one room triggers the obligation. In the US, all rental income must be reported on your tax return. Check with your local tax authority, as some jurisdictions have minimum income thresholds or specific exemptions for small-scale rentals.

What if tenants pay cash and there’s no transfer record?

Create a consistent manual recording system. Every time you receive cash, log the date, amount, and tenant name. Ideally, issue a simple receipt signed by both parties. Better yet, encourage tenants to switch to digital payments that automatically leave a record. Read about setting up QR code payments as an alternative to cash.

Are tenant security deposits taxable?

Generally no, as long as the deposit is expected to be returned. Deposits become taxable income in the year they’re withheld—for example, when deducted for damages, used to cover unpaid rent, or forfeited due to lease violations. Only the amount not returned becomes income.

Can Kamaru calculate my taxes?

No. Kamaru does not calculate taxes or generate tax returns. What Kamaru does is record every rent payment neatly—with date, amount, and tenant name—and generate income summaries per period through its financial report feature. This is the data you need to calculate your rental income tax: just look at the total income, apply your tax rate, and file. For the actual tax calculation and filing, use your country’s tax filing system or consult a tax professional.

Can repair costs reduce my rental income tax?

It depends on your country’s tax system. In the United States, yes—ordinary repairs are deductible in the year incurred, directly reducing your taxable rental income. Capital improvements must be depreciated over time. In Indonesia under the PPh 4(2) final tax, no—the 10% applies to gross income with no deductions allowed. Check with a local tax professional for your specific situation.

How long should I keep rental income records for tax purposes?

Record retention requirements vary: Indonesia requires a minimum of 10 years. The US IRS recommends at least 3 years from filing, up to 7 years in some cases. For property-related records, keep them until the statute of limitations expires for the year you sell or dispose of the property. As a general rule, keeping records for at least 7 years in digital format is a safe practice.

Conclusion

Rental property bookkeeping for taxes isn’t as complicated as it seems—as long as you have a consistent system in place. The key principles:

Understand your obligations — know what tax applies to your rental income and when to pay
Keep complete records — income proof, expense receipts, lease agreements, and tax payment evidence
Separate your finances — dedicated business account separate from personal
Record consistently — a little each week, not all at once at year-end
Pay and file on time — avoid unnecessary penalties and interest

The hardest part isn’t the calculation—it’s building the habit of recording every payment. Once that habit is in place, tax season stops being stressful.

Ready to organize your rental income records for tax time? Try Kamaru free today. Record every rent payment neatly, and view your income summary anytime—data that’s ready to use when tax season arrives. Setup takes just 5 minutes, no credit card required.