Tax deduction on lodging expenses while searching for an investment property

Member since 2023 · 2 posts · 1 vote

Hi all, I recently booked an Airbnb using some Airbnb credits (that originally came from a gift card) in my account while searching for an investment property. Since the stay was booked through account credits (instead of a credit card), is the amount tax deductible? Thanks.

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Janet Behm

Accountant · West Jordan, UT · Member since 2017 · 182 posts · 95 votes

Tze,

You are livin' the life!

If you have a receipt for the dollar amount of the stay, you can claim it as a business expense.

Credits are like cash.

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Janet Behm
Accountant · West Jordan, UT · Member since 2017 · 182 posts · 95 votes
3y
Tze,
You are livin' the life!
If you have a receipt for the dollar amount of the stay, you can claim it as a business expense.
Credits are like cash.
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Tze Chiam
OP
Member since 2023 · 2 posts · 1 vote
3y
Good to know! Thanks Janet!
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Bryan MartinBusiness Member
Accountant · Springfield, IL · Member since 2022 · 190 posts · 100 votes
3y
Quote from @Tze Chiam:

Hi all, I recently booked an Airbnb using some Airbnb credits (that originally came from a gift card) in my account while searching for an investment property. Since the stay was booked through account credits (instead of a credit card), is the amount tax deductible? Thanks.

In general, if you're using your Airbnb stay to conduct business (like evaluating investment properties), the expense may be tax deductible as a business expense. However, the fact that you used Airbnb credits instead of cash or a credit card does not necessarily prevent the expense from being deductible. It's the nature of the expense that matters, not the method of payment.

However, there are a few caveats.

First, in order to claim the deduction, you must be able to demonstrate that the expense was necessary and directly related to your business activity. For instance, if the purpose of the trip was to evaluate potential investment properties, then the cost of lodging could potentially be deducted as a business expense.

Second, even if the expense is deductible, the IRS (or your local tax authority, if outside the U.S.) may require you to provide a record of the expense. In this case, a receipt from Airbnb showing the use of the credits for the stay might be necessary.

Lastly, how you obtained the Airbnb credits could potentially affect the tax treatment. If they were received as a gift, you generally aren't required to report gift cards as income and can use them as if they were cash. However, if the credits were obtained in some other way (like as a rebate or a promotional offer), the tax treatment might be different.

Remember, tax laws can be complex and subject to interpretation, so it's always a good idea to get advice from a tax professional who's familiar with your specific situation.
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Michael PlaksPro Member
Tax Accountant / Enrolled Agent · Houston, TX · Member since 2014 · 5k+ posts · 6k+ votes
3y
@Tze Chiam

Let me spoil this high-five celebration.

First problem - is is really a business expense?

Extreme example 1. You drive with your family to hike in the Yosemite National park and stay in an Airbnb in the area. While there, the family looks out the windows and comments how nice it would be to own a cabin right here or over there. One time you even noticed a "For sale" sign and stopped to look. The asking price was ridiculous anyway. There was no time or motivation to look at anything else.

Extreme example 2. You researched the available listings in a blue-color area in San Antonio, TX. You contacted the listing agents and scheduled 6 showings between from Monday to Friday. You went alone, and each showing took over an hour, including the follow-up conversations with the agents. You spent the evenings enjoying the local attractions and restaurants. You submitted offers on 3 of the properties.

Obviously, pretty much everyone is somewhere in between these two extremes. But be careful to not push it too far. You need to be able to claim with a straight face (as opposed to a crooked one) that your trip and your lodging was primarily for business purpose, with personal enjoyment being incidental. Not the other way around.

Second problem - is it deductible then?

Did you buy any of the properties you looked at? If not, the trip is only deductible if you already have other investments in the area.

If you bought it - is it a flip? Then the cost of the trip is deductible against the sale price in the year it is sold. Not in the year it is bought.

Is it a rental? Then it's not deductible right away. It's added to the purchase price as just another cost of buying the property. And all of that, including the research trip, is slowly depreciated over many years rather than being deducted right away. Depreciation starts in the year you place this rental in service.

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