Some mortgages include an escrow component where you pay the mortgage servicer extra every month, and then they pay property tax and insurance out of that escrow account.
REI Hub's Loan Payment Template feature helps you break down your monthly mortgage payment into its principal, interest, and escrow components on an ongoing basis. The escrow component of your mortgage payment is a transfer, not a direct expense. It is funding the escrow account associated with your loan with a monthly approximation of what your mortgage servicer thinks the annual escrow expenses will be.
The IRS requires you to report your actual expenses, not your estimated expenses. Therefore, you can't just report the escrow transfers as property tax or insurance expenses; instead, you must enter the actual expenses.
Since these expenses are paid out of your escrow account, you will not have an imported transaction from your operating bank account to prompt you to book them. So, if you have an escrowed mortgage, don't forget to book your escrow expenses!
These instructions allow you to book your escrow expenses directly out of the escrow account you have been funding with your mortgage payments.
To Book Your Property Tax and Insurance Expenses From Your Escrow Account
1) Click Add Transaction from the top of the left menu
2) Select Escrow Expense from the Other column
The 'Expense Account' field should be Taxes or Insurance, as appropriate. Choose the escrow account associated with the loan for the property in question.
3) Click 'Save Transaction'
And you're done! The expenses will now be reflected in your Net Income/ Schedule E reports, and your escrow account balances will be reduced on the Balance Sheet.
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