Real Estate Investor Tax write-offs

Member since 2023 · 28 posts · 15 votes

Hi,

What do i I need to write off travel that is used to look for a property to invest in?

Do I need a business license ?

Can I write off all expenses from the trip, such as hotel, meals and travel costs like gas, or airfare? Is 100% of these costs a write-off?

Also, as a real estate investor, can I write off 100% of the education travel for real estate, such as the Bigger Pockets Cancun conference?

2 Reply

26 views

Most Popular Reply

Benjamin WeinhartBusiness Member

Accountant · Cincinnati OH 45245, USA · Member since 2022 · 112 posts · 112 votes

I'll echo Zach here a little to give my own perspective if it helps.

- It's very difficult to argue about travel being a business expense if you're just going to look at properties, I would argue against it in a majority of cases.

- Depends on what you're doing specifically, but usually I'd recommend getting an EIN at least to give access to business bank accounts

- Repeating #1, if you're going to a property and 100% of your time is spent doing renovations and the like, sure, but if any of it is for personal benefit, that'd be disallowed. You'll want to enlist a CPA on this to assist you

- Repeating the above for Cancun, since it's a vacation destination already, I'd almost guarantee you that you cannot write it off 100%

In regards to travel, it's also important to remember that even if everything is used 100% for business, the IRS classifies business expenses being valid if they're "ordinary and necessary". What this means is that if you own 1 or 2 rental properties out of state, you'd only be able to expense an economy flight/reasonable accomodations. If you owned a few thousand rental properties, you could argue that owning a private jet is a significant time saving tool and well worth the cost. It's all relative and subject to change based on each individual person.

[email protected]

Ice Accounting & CPA, LLC55 Reviews

View Page

1 Reply

See this reply in the discussion

16 Replies

Jump to latestLatest

Sort by

Account Closed
Accountant · San Diego, CA · Member since 2019 · 1k+ posts · 552 votes
2y
What do i I need to write off travel that is used to look for a property to invest in?

-This depends, travel isn't usually a write off to go look at property on its own as a smaller investor

Do I need a business license ?

- Generally no

Can I write off all expenses from the trip, such as hotel, meals and travel costs like gas, or airfare? Is 100% of these costs a write-off?
- Depends on a variety of factors

Also, as a real estate investor, can I write off 100% of the education travel for real estate, such as the Bigger Pockets Cancun conference?

- Also depends on a variety of factors.

These factors include if you are a biz owner or not and if that business is a real estate related one. In general, if you can tie an expense back to a legitimate business purpose its a write-off.
0 Reply
Benjamin WeinhartBusiness Member
Accountant · Cincinnati OH 45245, USA · Member since 2022 · 112 posts · 112 votes
2y
I'll echo Zach here a little to give my own perspective if it helps.
- It's very difficult to argue about travel being a business expense if you're just going to look at properties, I would argue against it in a majority of cases.
- Depends on what you're doing specifically, but usually I'd recommend getting an EIN at least to give access to business bank accounts
- Repeating #1, if you're going to a property and 100% of your time is spent doing renovations and the like, sure, but if any of it is for personal benefit, that'd be disallowed. You'll want to enlist a CPA on this to assist you
- Repeating the above for Cancun, since it's a vacation destination already, I'd almost guarantee you that you cannot write it off 100%
In regards to travel, it's also important to remember that even if everything is used 100% for business, the IRS classifies business expenses being valid if they're "ordinary and necessary". What this means is that if you own 1 or 2 rental properties out of state, you'd only be able to expense an economy flight/reasonable accomodations. If you owned a few thousand rental properties, you could argue that owning a private jet is a significant time saving tool and well worth the cost. It's all relative and subject to change based on each individual person.
[email protected]
Ice Accounting & CPA, LLC55 Reviews
View Page
1 Reply
Sean O'KeefePro Member
CPA | Accepting new clients | 50 States · Member since 2022 · 1k+ posts · 870 votes
2y
@Anita Z. I answered this question in detail in another thread. The main criteria to evaluate this is when did you complete the start-up phase and became actively engaged in business?

The answer to help you determine this is here https://www.biggerpockets.com/forums/51/topics/1164415-ne-re...

.

.

.

*This post does not create a CPA-client relationship. The information contained in this post is not to be relied upon. Readers are advised to seek professional advice.
[email protected]628-241-0888
0 Reply
Bill HamptonBusiness Member
Accredited Investment Fiduciary, AIF®, Financial Planner, Tax Strategist, Real Estate Investor · Atlanta, GA · Member since 2012 · 2k+ posts · 977 votes
2y
@Anita Z.
I recommend finding an accountant who specializes in real estate taxation, tax planning and financial planning. Yes, we exist.

You may want to consider working with your accountant remotely to expand your options.

I would also recommend looking for a accountant willing to work with you throughout the year. You want an accountant who can help you strategize and who is responsive when you want to know the consequences of the financial decisions you are making throughout the year.

Good luck.
404-482-3170
Hampton Tax and Financial Services LLC4.7106 Reviews
Website View Page
0 Reply
Anita Z.
OP
Member since 2023 · 28 posts · 15 votes
2y
@Bill Hampton @Account Closed

@Benjmin Weinhart @Sean O'Keefe Thank you so much, the expenses are legitimate and I am only traveling due to the investments I want to purchase San Diego. Sounds like I can safely write them off only after I purchase the rental and start the renovations to ultimately rent it out. I appreciate all the responses, thank you.
2 Reply
Fulton Abraham Sanchez
CPA| New Clients Welcome| 50 States · Member since 2016 · 430 posts · 93 votes
2y
To write off travel expenses incurred while looking for a property to invest in:

Business License: Not needed.
Deductible Expenses:

Travel Costs: Yes, such as gas or airfare.

Lodging: Yes.

Meals: 50% deductible.

Education Travel for Real Estate: Yes, 100% deductible.

Important: All these expenses are deductible if you report rental income. You've come to the right place, there are over 20 enlisted CPAs here in Biggerpockets working with real estate investors across different states. Feel free to reach out to one
0 Reply
Nicholas Coulter
Real Estate Agent · Southern California · Member since 2019 · 681 posts · 281 votes
2y
@Anita Z. do you currently have a CPA you work with?
0 Reply
Account Closed
Accountant · San Diego, CA · Member since 2019 · 1k+ posts · 552 votes
2y
Quote from @Anita Z.:

@Bill Hampton @Account Closed

@Benjmin Weinhart @Sean O'Keefe Thank you so much, the expenses are legitimate and I am only traveling due to the investments I want to purchase San Diego. Sounds like I can safely write them off only after I purchase the rental and start the renovations to ultimately rent it out. I appreciate all the responses, thank you.

Happy to help! im here in San Diego, if you ever have a question about the local market feel free to reach out :)
1 Reply
Tanner PileBusiness Member
Real Estate Broker · Colorado Springs, CO · Member since 2019 · 388 posts · 326 votes
2y
@Anita Z.
The BP Tax book has a section all about this. Basically almost all the items you mentioned when traveling can be written off to a certain extent. You can even plan vacations that are written off if using the sandwich method by doing work on Friday and Monday for real estate and the weekend is there so you do vacation stuff so all lodging and travel can be written off.
Tanner Pile4.931 Reviews
Website View Page
0 Reply
Jason MalabuteBusiness Member
Accountant · Los Angeles, CA · Member since 2016 · 2k+ posts · 898 votes
2y
Hey!

So, when it comes to writing off expenses, here’s the scoop: you generally can’t deduct travel expenses if you’re just looking for a new property to invest in. But, if you’re traveling to check out a property you already own, that could be deductible. Also, you don’t need a business license just to look at properties, but if you buy a bigger property, like a multi-family unit, you might need a certificate of occupancy, depending on the local rules.

For business trips, most expenses can be deductible, but if it’s part personal and part business, you can only deduct the business portion. The airfare, though, is usually 100% deductible even if you mix business with some pleasure. Meals, on the other hand, are only 50% deductible, with some exceptions. Just keep in mind that entertainment expenses—like taking clients out for a show or a game—aren’t deductible anymore.

And, yes, you can deduct 100% of your education expenses if you’re already a real estate investor. But if you’re just getting started and haven’t done any investing yet, those costs might not count as business deductions.

Hope this clears things up!
Malabute & Company CPAs525 Reviews
Website View Page
1 Reply
Anita Z.
OP
Member since 2023 · 28 posts · 15 votes
2y
Sweet! Thanks @Jason Malabute ! Appreciate your input here, this is so helpful!
0 Reply
Anita Z.
OP
Member since 2023 · 28 posts · 15 votes
2y
Thanks @Tanner Pile, I wasn't aware of the BP Tax book. Is it accessible on this forum?
1 Reply
Tanner PileBusiness Member
Real Estate Broker · Colorado Springs, CO · Member since 2019 · 388 posts · 326 votes
2y
Quote from @Anita Z.:

Thanks @Tanner Pile, I wasn't aware of the BP Tax book. Is it accessible on this forum?

If you go to the get started tab and go to the bookstore you can find it there.
Tanner Pile4.931 Reviews
Website View Page
0 Reply
Ashish AcharyaBusiness Member
CPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
2y
Travel costs to look at other properties.

If you travel but have not identified the property that you want to buy yet, the cost is considered an investigating cost. These costs for most of the individuals are considered personal in nature (unless you have a RE portfolio that is run like a business; see below). If you had identified the property, the cost and the travel cost would have been added to the basis of the property and depreciated.

These initial investigatory costs are treated differently for flipping and rentals.

1) Flipping: The travel cost to investigate will be treated as a business cost and deducted as an ordinary travel cost. If you don't have an entity, this is a Schedule C activity. Flipping is more than likely to be considered trade or business.

2) Rentals: Rentals are not considered trade or business for this purpose, so initial inventory costs cannot be deducted as travel expenses. This travel expense is not a business expense related to the property you already own until you have identified the next property you want to buy (once identified, costs are added to the basis mentioned above). You can't deduct travel expenses before identifying property because you report every rental activity you already own on Schedule E. The travel expense to investigate another property is not related to the activity that you already own. And you don't have Schedule C to deduct the business expense.

This might have changed if your RE portfolio was run like a business and/or you have a partnership; the partnership would then deduct the travel expense as an ordinary business expense.

As I said, it gets complicated quickly. Please talk to your CPA.
[email protected]941-914-7779
INVESTOR FRIENDLY CPA®5241 Reviews
Website View Page
TaxMD™ | AI-Powered Tax Planning
Website View Page
0 Reply
Anita Z.
OP
Member since 2023 · 28 posts · 15 votes
1y
Can a golf cart used for & parked at an AirBnb be a tax write off?
0 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.