Personal Finance

5 Tips for Those Looking to Make Their Summer Vacation a Real Estate Tax Write-Off

Expertise: Business Management, Real Estate Investing Basics, Personal Finance, Personal Development, Real Estate News & Commentary, Mortgages & Creative Financing
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Beautiful Beach Vacation Rental House

As an investor, I love looking at houses wherever I go. In fact, I am probably like most investors who always have real estate on the mind. Whether traveling to look for properties or managing properties while on the road, a portion of all of my travel trips undoubtedly involve some sort of "work" related to my investing.

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Contrary to popular belief, just because I happen to work on my real estate during my trip does not automatically mean it’s a tax deductible trip.

Although it is possible to take a tax deduction for part of all your travel costs, if they are business related, you need to first be sure that you have everything in place to legitimately get the write-off. Yes, I did say “legitimately.” That means that if you get audited, you have the documentation and support to win the argument over the IRS.

5 Tips for Those Looking to Make Their Summer Vacation a Real Estate Tax Write-Off

In order to make this possible, there is some action that is needed on your part before you even take your trip. Let’s take a look at an example of how Judy, an investor, can maximize her travel tax deductions.

1. Schedule appointments and plan meetings before leaving.

The sun is out, and it’s time to play. If you think you can just hand out your business cards while you are on the beach in Florida to get a tax deduction, you are definitely wrong.

Related: 5 Tips For Maximizing Your Tax Income Deductions For NEXT Year

In order to make your trip deductible, you need to schedule at least one business meeting or activity before leaving for your trip. The IRS wants to know that you had a “prior set business purpose” in order to write off your travel costs.

For example, if you “happened” to attend a real estate conference while in Florida, that does not mean you went to Florida for business purposes. On the other hand, if you pre-registered for this Florida conference, then you can show that the reason you went to Florida was to attend this real estate conference.

return-visit-vacation-rental

This is a subtle but very important distinction. The best way to document this is with email. Emailed registration paperwork or receipts are strong documents that can help substantiate your travel “purpose.”

Example: Judy wants to take a trip to sunny Florida. If she schedules multiple meetings and appointments with her business contacts and colleagues or conducts a presentation meeting to a group of other investors, the IRS can accept her trip as a tax deduction for her business.

2. Find ways to deduct on-the-road expenses.

If you want to deduct all of your travel expenses (i.e., flight or driving costs), then you need to be traveling primarily for business. You can deduct 100 percent of your travel expenses according to the IRS as long as more than 50 percent of your trip was business-related.

Example: Judy was traveling on a five day trip. For her, three out of five business days she spent in Florida were related to her investing business. Since more than 50 percent of her time was spent on real estate investing activities, then the entire cost of the trip would be tax deductible to Judy.

3. Remember: Every day counts for your travel expenses.

Each day that you are traveling provides you opportunities to capture tax deductions. One hundred percent of your hotel, gratuity, and car rental and 50 percent of your food costs may be tax deductible.

Example: Judy is away on a business trip for four days and has meetings planned with investors most of those days. She can deduct the costs for her meals and entertainment for those days. In fact, even if Judy decided to eat by herself on these days, those would still be tax deductions if the primary reason for this trip was related to her investing business.

4. Throw away those receipts.

A lot of people may not know that the IRS does not require you to keep receipts for certain expenses under $75 (except for your hotel). Just because you do not need receipts does not mean you don’t need to track your expenses, because odds are high that if you don’t track your expenses, you will forget about them by next April’s tax deadline.

Example: Make sure you include expenses such as laundry, dry cleaning, tips, parking, meals, entertainment, etc. Even the first dry cleaning bill you receive when you return home may be fully tax deductible.

Related: The New Rules Of The IRA Rollover: How To Protect Your Money From The Taxman’s Penalties

5. Include a weekend in your travel plans.

If you have a business meeting on a Friday and schedule another meeting on a Monday, then you may be able to legally deduct your entire hotel and on-the-road expenses for the weekend in between.

Example: Judy has a presentation with potential investors on a Friday and scheduled follow-up appointments with the investors for Monday. Although she did not have any meetings on Saturday or Sunday, she can deduct any on-the-road expenses and hotel costs she incurs during the weekend.

Taxes can be fun when you find creative ways to save more of your hard-earned money. Before you take that vacation this year, plan ahead and look for ways to turn it into a business trip.

Do you have any awesome tax-saving stories?

Be sure to leave your comments below!

Amanda is a CPA specializing in tax strategies for real estate, self-directed investing, and individual tax planning with over 18 years’ experience. She is also a real estate investor of over 10 ye...
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    Deen
    Replied over 6 years ago
    Yes! it’s a known fact that you can take a vacation and have it deducted as well. However, you have to make sure you document all the business transactions on that trip for tax purposes and record.
    Shaun
    Replied over 6 years ago
    Actually going on a vacation this month and plan on writing off a fair amount as a business expense. My sister in law lives ~2300 miles away. We are going to visit her. I happen to own several rental about 2/3 of the way there. They are NOT in a vacation spot! However they are in a perfect area to stop for since it is not a 1 day drive (at least not with kids). The plan is to drive there get in late to the hotel and crash then do stuff the next 2 days and leave early the next day for the rest of the trip. I plan on visiting all my properties as well as having meetings with my property managers and at least 1 other realtor. On the way back we will stop for lunch there with an investor colleague that is also the secretary of the local landlord association. The plan is to write off the mileage to there and all the driving around to the various appointments. Write off the hotel there and all the travel expenses getting there. Write off all the meals getting there and while there. We will do some family activities in the mornings before my appointments and in the evening after them, do not plan on writing those off (Unless a professional colleague joins us, which I am not expecting). I do not plan on writing off any mileage or expenses going the rest of the way to the sister in laws. We are staying with her so no hotel but I would not plan on taking that even if we were. On the way back no mileage or expenses getting back to where the rentals are. Stop in the city for the lunch appointment I mentioned. Write that off and all the miles and expenses getting home as we would have had all of those if we went right home without taking the actual vacation in the middle. I believe this is all legitimate and not really even aggressive.
    Shaun
    Replied over 6 years ago
    Actually going on a vacation this month and plan on writing off a fair amount as a business expense. My sister in law lives ~2300 miles away. We are going to visit her. I happen to own several rental about 2/3 of the way there. They are NOT in a vacation spot! However they are in a perfect area to stop for since it is not a 1 day drive (at least not with kids). The plan is to drive there get in late to the hotel and crash then do stuff the next 2 days and leave early the next day for the rest of the trip. I plan on visiting all my properties as well as having meetings with my property managers and at least 1 other realtor. On the way back we will stop for lunch there with an investor colleague that is also the secretary of the local landlord association. The plan is to write off the mileage to there and all the driving around to the various appointments. Write off the hotel there and all the travel expenses getting there. Write off all the meals getting there and while there. We will do some family activities in the mornings before my appointments and in the evening after them, do not plan on writing those off (Unless a professional colleague joins us, which I am not expecting). I do not plan on writing off any mileage or expenses going the rest of the way to the sister in laws. We are staying with her so no hotel but I would not plan on taking that even if we were. On the way back no mileage or expenses getting back to where the rentals are. Stop in the city for the lunch appointment I mentioned. Write that off and all the miles and expenses getting home as we would have had all of those if we went right home without taking the actual vacation in the middle. I believe this is all legitimate and not really even aggressive.
    Ana Nomys
    Replied about 6 years ago
    Amanda, Awesome tips. Now a BIG fan and follower. Look forward to learning more strategies on how to keep more of my hard earned money LEGALLY. FTR I love America and pay my fair share of taxes and truly believe if there are legitimate ways to lower my tax liabilities there is nothing immoral about it. Thanks Ana
    Amanda Han
    Replied about 6 years ago
    Thanks for your comment Ana and thank you for reading!
    Mehran K. Investor from Wichita Falls, TX
    Replied over 4 years ago
    Amazing article that made a lot of “where’s the line?” questions I had, very clear to me now. Thank you Amanda 🙂
    Kuntay Talay from Olathe, Kansas
    Replied about 3 years ago
    Thank you Amanda! Great article…great tips. I will certainly keep them in mind next time I travel 😉 Kuntay Talay
    Drew Kessler from Harpers Ferry, West Virginia
    Replied almost 3 years ago
    Amanda, Do you have to be a “real estate professional” to take advantage of these deductions? Or can you do so with a full time job and investing on the side. Thanks, Drew
    Jeffrey Allen Real Estate Investor from Southern, Indiana
    Replied almost 3 years ago
    Amanda, I own and manage a rental, and made a trip this year to potentially buy another one in a different area. I’d have no trouble proving that the trip’s intent was to explore another purchase based on meeting schedule and pictures I took, but since I never bought in the area I’m uncertain how I would actually claim the miles/expenses. Can I just assume that the current rental and any other “potential” rentals are a part of the same business? @Amanda Han
    Ashley Wilson Rental Property Investor from Radnor, PA
    Replied about 2 years ago
    Great post!!!
    Bhanu Sigdel Flipper/Rehabber from Denver, CO
    Replied 9 months ago
    Great article and great tips. Thank you!