Can you write off expenses that were incurred before you bought a property?

Question

Hello everyone,

I'm a new investor and haven't bought a property yet. I've read that you can write off expenses such as conference registration fees and mileage. I plan to purchase my first property before it's time to file taxes in April, 2024. If I do, can I write off mileage related to driving to a meetup that took place before I actually purchased a property? If I don't have a property by the time I file, can I write off any expenses?

Thanks in advance for your time! I really appreciate the willingness of people on this forum to answer questions.

JD Martin · Answer

You can do anything you want until you have to prove your case in an IRS audit. Without owning anything, you are not an investor. So I would think really hard about deducting expenses for non-existent rental property.

Bryan Odom · Answer

@Sean O'Keefe @Eric Williams and JD Martin, thank you for the feedback!

Eric Williams · Answer

No.

These are called investigative expenses, and are capitalized under 195. They are the amount incurred during the period you decide whether to enter a business, and which business to enter.

Once you decide on the property and move forward, then you generally capitalize the transaction costs and start up under 263 and 195 (possibly others depending on type of business).

Also it needs to be deductible if someone else was doing it. Meals and travel have special rules for deducting and especially for record keeping.

You cannot never deduct a trade or business items unless there is the carrying on of a trade or business.

If you capitalize and it falls through, you write off as a loss related to a transaction entered into profit for 165.

195(1)Start-up expendituresThe term “start-up expenditure” means any amount—(A)paid or incurred in connection with—(i)investigating the creation or acquisition of an active trade or business, or(B)which, if paid or incurred in connection with the operation of an existing active trade or business (in the same field as the trade or business referred to in subparagraph (A)), would be allowable as a deduction for the taxable year in which paid or incurred.165c)Limitation on losses of individualsIn the case of an individual, the deduction under subsection (a) shall be limited to—(1)losses incurred in a trade or business;(2)losses incurred in any transaction entered into for profit, though not connected with a trade or business; and

Sean O'Keefe · Answer

@Bryan Odom I think what you are asking is what are the rules around deductions for business or rental.

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Can you write off expenses that were incurred before you bought a property?

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