Tracking Expenses

Tracking expenses is the single most important habit for maximizing your tax deductions. Every dollar you don’t record is a dollar you can’t deduct. This guide covers the day-to-day workflow of getting expenses into RealBooks and keeping them organized.

The Daily Routine That Saves You Thousands

Most investors lose deductions not because the expenses don’t exist, but because they never get recorded. The fix is simple: build a 2-minute daily habit.

1. Open RealBooks (phone or desktop)
2. Review any new imported transactions
3. Approve or correct PennyAI’s suggestions
4. Scan any receipts from the day

That’s it. Two minutes a day keeps your books clean and your deductions intact. No more February panic trying to reconstruct a year’s worth of spending.

Method 1: Bank-Linked Transactions

If you’ve linked your bank accounts, transactions flow in automatically. This is the lowest-effort way to track expenses.

What Happens Automatically

1. Your bank sends new transactions to RealBooks throughout the day
2. PennyAI reads each transaction and suggests:
   • Category — Repairs & Maintenance, Insurance, Utilities, etc.
   • Property — Which property this expense belongs to
   • Entity — Auto-filled from the property
   • Deductible flag — Whether this qualifies as a tax deduction

Your Part: Review and Approve

Go to Expenses and look at the pending transactions:

• Green checkmark = PennyAI is confident. Approve with one click.
• Yellow flag = PennyAI has a suggestion but isn’t sure. Review the category and property assignment.
• No suggestion = New vendor or unusual transaction. You’ll need to categorize it manually.

Correcting PennyAI

When PennyAI gets it wrong, correct it:

1. Click the transaction
2. Change the category, property, or entity
3. Save

PennyAI learns from every correction. After a few weeks, you’ll find yourself approving most transactions without changes.

Common corrections to make early on:

• Home Depot/Lowe’s charges often need the right property assigned (PennyAI may not know which property you’re working on this week)
• Insurance payments may come from a single account but apply to different properties
• Utility payments from the same provider may cover multiple addresses

Method 2: Receipt Scanning

Receipt scanning is essential for expenses that don’t flow through your bank — cash payments, contractor checks, and on-site purchases.

On Your Phone (Recommended)

1. Open RealBooks on your phone
2. Tap Expenses > Scan Receipt
3. Point your camera at the receipt and take a photo
4. PennyAI processes it in a few seconds and shows:
   • Vendor name
   • Amount
   • Date
   • Suggested category
   • Suggested property
5. Review, adjust if needed, and tap Save

On Your Desktop

1. Go to Expenses > Upload Receipt
2. Drag and drop the receipt image (JPG, PNG, or PDF)
3. Review PennyAI’s extraction and save

When to Scan Receipts

Scan immediately. The best time to capture a receipt is the moment you get it. Here’s why:

• Thermal paper fades. That Home Depot receipt will be blank in 3 months.
• Context is fresh. You know which property this $47 in supplies was for right now. In 6 months, you won’t.
• It takes 10 seconds. The cost of scanning now is tiny. The cost of losing a deduction is real.

Tips for Better Scans

• Lay the receipt flat on a dark surface
• Make sure the vendor name, total, and date are visible
• Avoid shadows across the text
• If the receipt is long, take two photos (PennyAI handles multi-part receipts)
• Crumpled receipt? Flatten it first — even a few seconds of smoothing helps

Method 3: Email Invoicing

For recurring bills and contractor invoices, forward them to your RealBooks email address.

How It Works

1. You receive an invoice via email (property management bill, utility statement, contractor invoice)
2. Forward it to your RealBooks email address (found in Settings > Email Invoicing)
3. PennyAI reads the invoice and creates a pending expense with:
   • Vendor and amount
   • Line items (if present)
   • Due date
   • Suggested category and property
4. Review and approve in your expense inbox

Best For

• Monthly property management invoices
• Quarterly insurance bills
• Contractor invoices for completed work
• Utility statements you receive by email

Tip

Set up email forwarding rules in your inbox. If your property management company always sends invoices from the same address, create a rule that auto-forwards them to RealBooks. Hands-free expense capture.

Method 4: Manual Entry

For anything that doesn’t come through the other channels.

1. Go to Expenses > Add Expense
2. Fill in:
   • Amount and date
   • Vendor — Who you paid
   • Category — Select from the IRS-aligned list
   • Property and Entity — Where this expense belongs
   • Notes (optional) — Add context if needed
   • Receipt (optional) — Attach an image
3. Click Save

When to Use Manual Entry

• Cash payments to contractors or handymen
• Mileage for property visits (log the trip and calculate the IRS rate)
• Owner contributions or capital infusions
• Expenses paid from accounts you haven’t linked
• Historical expenses when first setting up RealBooks

Assigning Expenses to Properties

Every expense in RealBooks should be assigned to a specific property. This is what makes your tax reports accurate — Schedule E is filed per property, so each expense needs to go to the right one.

Single-Property Expenses

Most expenses are straightforward: you bought materials for 123 Oak Street, so the expense goes to 123 Oak Street.

Multi-Property Expenses

Some expenses cover more than one property:

• Portfolio insurance policy covering all your rentals
• Property management fee that bundles multiple properties
• Bulk material purchase split across two rehab projects

To handle this:

1. Open the transaction
2. Click Split
3. Allocate amounts to each property (by dollar amount or percentage)
4. Save

Each portion appears as a separate expense on the respective property’s records.

Entity-Level Expenses

Some expenses belong to an entity but not a specific property:

• LLC annual filing fees
• Entity-level legal fees
• Accounting and bookkeeping costs
• Business insurance for the LLC itself

Assign these to the entity without a specific property. They’ll appear in your entity-level reports and can be deducted on the entity’s tax return.

Categorizing Expenses Correctly

Getting categories right is important because they map directly to your IRS schedules. Here’s a practical guide to the most common categories:

Repairs & Maintenance

Things that keep your property in its current condition.

• Fixing a leaky faucet
• Replacing a broken window pane
• Patching drywall
• Unclogging a drain
• Repainting a room between tenants

Capital Improvements

Things that make your property better, adapt it to a new use, or restore it after damage. These are depreciated over time, not deducted immediately.

• New roof
• Kitchen renovation
• Adding a bathroom
• New HVAC system
• Replacing all windows

Insurance

• Property insurance premiums
• Liability insurance
• Flood insurance
• Umbrella policies (allocate to properties covered)

Property Taxes

• Annual property tax payments
• Special assessments

Utilities

Only landlord-paid utilities:

• Water/sewer (if not tenant-paid)
• Electric (if not tenant-paid)
• Gas (if not tenant-paid)
• Trash collection

Management Fees

• Property management company fees (typically 8-12% of rent)
• Leasing fees for tenant placement

Legal & Professional

• Attorney fees (lease review, evictions, entity setup)
• CPA and tax preparation fees
• Bookkeeping services

Travel

• Mileage to and from properties (use the IRS standard mileage rate)
• Airfare and hotel for out-of-town property visits
• Meals during property-related travel (50% deductible)

Note

Keep a log of property-related travel. RealBooks tracks the expense, but you should note the purpose — “Drove to 123 Oak St to meet contractor for roof estimate” — in case of an audit.

Handling Edge Cases

Expenses Before You Start Using RealBooks

Upload historical bank statements (CSV or PDF) from Settings > Import. RealBooks will import and categorize the transactions. For receipts you’ve been saving, scan them in batch.

Expenses Paid by Someone Else

If a partner, property manager, or contractor pays an expense that should be on your books, add it manually and note who paid in the description.

Personal Expenses on a Business Account

Mark them as Personal so they’re excluded from deductions and reports. Don’t delete them — keeping them visible (but flagged) helps you reconcile your accounts.

Refunds and Credits

When a refund comes through your bank, assign it to the same property and category as the original expense. It’ll appear as a negative, reducing your net expense total.

Staying Organized Long-Term

• Review daily — Even 2 minutes keeps you current
• Scan receipts immediately — Don’t let paper accumulate
• Correct PennyAI early and often — The first month of corrections pays off all year
• Split multi-property expenses promptly — Don’t let them sit unsplit in your inbox
• Run a monthly expense report — Spot anomalies while you still remember the context
• Tag project expenses — If an expense is part of a rehab, assign it to the project too (not just the property)