How to record a property tax payment in your rental property books
Record a property tax payment as a Property taxes expense on the date you pay it if your books are on the cash method, or spread it by month if you use accrual. It goes on Schedule E, line 16. Special assessments for things like new sidewalks are different: they usually add to the property's cost instead.
On the cash method: expense when you pay
Most small landlords use the cash method for taxes, which means an expense counts in the year you pay it. IRS Publication 527 lists real estate taxes among deductible rental expenses. Property tax is paid in installments in many places, so enter each one on the day it leaves your bank account.
Example a made-up annual tax bill is $6,240, due in two installments of $3,120, one in November and one in April. A calendar-year owner books $3,120 in November of this year and $3,120 in April of next year. Each is a Property taxes expense. The year the bill covers does not matter on the cash method.
| Date | Account | Debit | Credit |
|---|---|---|---|
| Nov 1 | Property taxes | $3,120 | |
| Nov 1 | Checking | $3,120 |
On the accrual method: expense as the year passes
If your books use accrual, record one-twelfth of the yearly tax each month and build up a liability called Property tax payable. The payment itself then reduces the liability instead of hitting the expense. This keeps monthly profit and loss statements steady, which is why lenders and buyers like to see them. The two methods are compared in cash vs accrual for rentals.
Many owners keep monthly books on accrual for management reasons and let their preparer convert to cash for the return. Ask your preparer which they want.
When someone else pays it
- The lender pays it from escrow: you will not see it in your bank feed. Enter it from the escrow statement. See mortgage escrow bookkeeping.
- You bought or sold during the year: the closing statement splits the tax between buyer and seller. See property tax at closing.
- A tenant pays it under a triple net lease: the payment is rental income to you and your expense, as in utility reimbursements.
Special assessments and refunds
A bill from the city for a new street, curb or sidewalk is often a special assessment for a local benefit. IRS Publication 551 says assessments for local improvements such as streets and sidewalks add to the basis of the property instead of being deducted as taxes. Ask your preparer, since a charge for upkeep and repair is treated differently.
If the county refunds tax after an appeal, record the refund as a reduction of Property taxes in the year you receive it, or as income, as your preparer prefers. If you plan to appeal, see appealing a property tax assessment.
Checks before filing
- Match the tax paid to the county's receipt or the tax bill's payment record, not just your bank statement.
- Confirm the parcel number matches the property, especially if you own more than one.
- Give your preparer the total on the line labeled Taxes, which is Schedule E line 16.
Late payment penalties and interest on property tax can be treated differently from the tax. Ask your preparer.
How DoorKeeping handles it
When a county payment comes through the bank feed, the assistant codes it to Property taxes and you confirm with one tap. Each property keeps its own books, so a payment is never mixed with another LLC's. Ask Claude or ChatGPT for the property's Schedule E report at year end to see the total. For taxes paid from escrow, use the lender's statement. DoorKeeping gives no tax advice, so check cash or accrual treatment with your preparer.
Sources
- IRS, Publication 527, Residential Rental Property (deductible rental expenses), read Oct 30, 2026
- IRS, Publication 551, Basis of Assets (assessments for local improvements), read Oct 30, 2026
Questions
- Which line of Schedule E is property tax?
- Taxes are on line 16 of Schedule E.
- When do I deduct property tax on a rental?
- On the cash method, in the year you pay it. Accrual books spread it across the months it covers.
- Is a special assessment deductible?
- Assessments for local improvements such as sidewalks generally add to basis rather than being deducted. Ask your preparer.
- What if my lender pays the tax?
- Enter it from the escrow statement on the date the lender paid. It will not appear in your bank feed.