Can travel expenses be tax deductible?

Question

Hi there, when my family and I travel, we simultaneously use that trip to look at potential investment properties. I was wondering, are any of those travel expenses tax deductible?

Kory Reynolds · Answer

Possibly.  Travel expenses can be very tricky - there are a bunch of bifurcations based on if the trip is primarily for personal, primarily for business, or somewhere in-between - including the allocation of airfare and other costs.  If the trip is mostly personal, then only the expenses directly related to looking at potential investment properties would actually be deductible, which is likely rather minimal - maybe some gas or Uber costs to get there?

That said, there would be arguably no business purpose to bringing your family along with you, so even if you are spending the entire time searching for real estate. If you brought your spouse and 2 kids with you, and you could argue all of your argue of your time on the trip was looking at real estate, and your personal business and activity circumstance defends being able to immediately deduct it and not treat it as a start up cost... likely 75% of much of the travel costs (airfare, food, etc) would be non-deductible.  Bringing your family along also puts a serious damper on that the primary purpose of the trip was actually for business - not impossible, but in my eyes it definitely taints it in a way that you really want to ensure everything is buttoned down on the business purpose and the actual business activity that occurred.

Ashish Acharya · Answer

@Scott K.

1. Travel expenses to look at potential investment properties are generally not tax-deductible unless you operate a real estate portfolio like a business.

2. For flipping properties, travel costs to investigate investments can be deducted as ordinary business expenses, typically reported on Schedule C.

3. For rental properties, travel expenses for investigating new properties are not deductible unless you've identified a property to purchase, in which case these costs are added to the property's basis.

4. If your real estate portfolio operates as a business or partnership, there may be exceptions, allowing travel expenses to be deducted as business expenses.

*This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

Garrett Brown · Answer

Absolutely can. If you are working with an investor-friendly CPA, I would ask what you need to document to make it easy to write off the expenses. If you don't have a great CPA, check out BiggerPockets CPA Finder!

Account Closed · Answer

Hey Scott, any expenses that are ordinary and necessary to business activity can be expensed. As for you specifically most likely yes but its not that strait forward as @Kory Reynolds points out

Andrew Strauss · Answer

Hi Scott - You have got the answer so i won't repeat it but key with travel expenses is have a good documentation and clearly bifurcating between personal and business.

Basit Siddiqi · Answer

Travel costs being deductible will depend on the purpose for the travel to the area.If you have a rental in the area, then they are deductible rental costs.If you don't have any rentals in the area, they may be explaratory costs and may need to be added to basis.

Max Emory · Answer

Hey @Scott K., do you currently have an REI-savvy CPA or tax pro? If not, I recommend commissioning one and only taking their counsel on tax-specific questions.

I have a list I keep updated and recommend through our REI bookkeeping firm if you don't currently have one.

They can walk you through exactly what you can and cannot write off during these trips and what you need to document in order to write things off.

It's not necessarily a simple "yes" or "no". It's usually "it depends" on your very specific situation.

Happy to send that list over if you need it!

Jason Malabute · Answer

If you’re not an  investor yet then those travel expenses wouldn’t be deductible. If you are a real estate investor currently already then yes  the travel expenses  are deductible.

Can travel expenses be tax deductible?

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