Booking your annual expenses from escrow

Booking your annual expenses from escrow

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, and instead 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 cue you to book these expenses.  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 Any Transaction from the Portfolio Dashboard

You can also click Add Transaction from the Booked Transaction page

2) Select Escrow Expense from the Other column

3) Fill out the fields as appropriate

The 'Expense Account' field should be Taxes or Insurance as appropriate.  Choose the Escrow Account that is associated with the loan for the property in question.

4) Click Save Transaction

And you're done!  You will now see the expenses being reflected in your Net Income/ Schedule E reports, as well as your escrow account balances reducing on the Balance Sheet.

5) Reach out to us with questions or for assistance!

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