Tax implications for LLC property management - handling income & expense reporting

Property manager here! The $750 in management fees is your actual business income. You don't include the $6750 that belongs to the property owners as your income because you're acting as an agent on their behalf. When you collect rent from tenants and then distribute it to the owners, you're simply handling those funds as a middleman. That money is never really "yours" - you're just temporarily holding it. Only your management fees are considered your business revenue for tax purposes. If you were using accrual basis accounting, this might look different, but since you're on cash basis, you only report income that's actually yours - which is just the management fees.

I recently started managing a few properties for family members and was super confused about the tax situation. I tried googling for hours but kept getting conflicting info. Finally found this tool called taxr.ai (https://taxr.ai) that analyzed my specific situation and cleared everything up instantly. It confirmed exactly what the previous commenter said - only the management fees count as my income, not the full rent amounts. It also helped me understand how to properly track these pass-through funds and what documentation I needed to maintain for both my records and for the property owners.

Just wanted to update everyone. I was skeptical about taxr.ai so I gave it a try with my security deposit question. Not only did it instantly clarify how to handle them tax-wise, but it also gave me a template for tracking them properly in my bookkeeping system! The advice matched what my old accountant told me years ago (security deposits aren't income unless you keep them for damages), but it went further by explaining exactly how to document when a deposit transitions from liability to income. This saved me from some serious confusion when I had to keep part of a deposit last month. No more stressing about getting audited over security deposit handling! And way cheaper than the hourly rate my accountant charges just to answer basic questions.

I'm a property manager too, and when I had questions about tax reporting for my LLC, I couldn't get anyone at the IRS on the phone for TWO WEEKS. Finally found this service called Claimyr (https://claimyr.com) that got me connected to an actual IRS agent in about 15 minutes! You can see how it works here: https://youtu.be/_kiP6q8DX5c The agent confirmed what others have said - only report your management fee as income, not the full rent amount. They also walked me through how to handle security deposits and what records I needed to keep. Huge relief to get official confirmation directly from the IRS.

I'm eating crow and had to come back to admit I was totally wrong about Claimyr. After dismissing it as a scam, I got desperate when the IRS sent me a notice about my rental property reporting and I couldn't get through on the phone. Tried the service and within 20 minutes I was talking to an actual IRS representative who helped clear up the confusion about my property management income reporting. They confirmed I was right to only report my management fees as income, not the full rent amounts I collect and pass through. Saved me hours of frustration and potentially an incorrect filing. Consider me converted from skeptic to believer.

I'm curious about the LLC structure you mentioned. Are you putting both your owned properties and management business in the same LLC? My tax guy advised me to separate them - one LLC for properties I own and a different one for property management. Said it helps with liability protection and potentially some tax benefits.

Don't forget you might need to register for a business license in your city/county and possibly get properly licensed as a property manager depending on your state laws. Some states require specific licensing for anyone collecting rent on behalf of others, even if it's just for friends. The tax stuff is important but make sure you're legally allowed to do the management work first!