In 2024 we started using a property management company to handle our rental property. It's rented out for a minimum of 30 days (local regulation). The jurisdiction where the property is located charges an occupancy tax for the rentals.
We hired a separate company to take care of computing and paying the occupancy tax. Should the expenses for that firm be entered under Legal Expenses or under Property Management Expenses. The expenses for firm the handles the actual bookings and rental income clearly falls under Property Management Expenses but not sure about the other company that just handles local taxes.
Side question ... both the property management company and the local tax handling company are just that...companies with a nation-wide presence and not independent individuals. So I assume we no NOT need to send them a 1099-NEC for their fees.
Thanks
How you categorize your business expenses is an accounting decision. If these fees are related to operating your property, they may both be reported under Management Fees. Legal expenses are typically paid only to attorneys.
Although Schedule E provides some specific categories, you can enter any or all expenses as "Other Expenses," if that works for your company. Even if you enter a general business expense in the "wrong" category, it will not affect your taxes. Just be sure you don't enter the same expense twice.