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Updated over 9 years ago on . Most recent reply presented by

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Kevin Trumbull
  • System Administrator / Investor
  • Eugene, OR
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Do I have to have a company to write off travel expenses?

Kevin Trumbull
  • System Administrator / Investor
  • Eugene, OR
Posted

I'm a new to-be real estate investor and I was wondering if I will be able to write off travel expenses if I do not own a company.

For example, I'm looking at purchasing a property outside my local market.  I do not currently own any investment properties yet (just my primary residence).  If I fly out to a city to check it out, drive around to get a feel for the neighborhoods, and maybe meet with a local company to check out available properties, can I write any of that off on my taxes?

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Linda Weygant
  • Investor and CPA
  • Arvada, CO
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Linda Weygant
  • Investor and CPA
  • Arvada, CO
Replied

Expenses incurred to research an investment (including travel) and costs incurred to then buy it become part of the basis of the next item of that type that you buy.  

Say you do the following:

Travel to City A, B and C.  Six months later, you buy a property in City B.  Your travel expenses incurred for all 3 cities become part of your basis for that property.  If, within the same tax year, you then buy another property in City C, you could opt to split your travel expenses between the two properties, if you wish.

Note that the travel has to be PRIMARILY for investment research.  Going to mom's house for Thanksgiving and glancing through the local paper when you get there doesn't really count.  Going to Hawaii to parasail, surf and SCUBA with an afternoon for househunting doesn't really count either.  Traveling to another city to "get a feel for if it's right" doesn't really count.  You need to be actually researching specific property and generally pursuing a deal.

Save all receipts.  Save your communications with the local real estate agent, write down the addresses of properties you visited and other professionals you talked to.  Keep this documentation with all of your other tax receipts for the basis of your property.

Just a personal preference - Meals and Entertainment is too grey of an area for the IRS, so I personally do not write off any meals when I travel to look at property.  If I drive there, I write off mileage and hotel.  If I fly, I do airfare, car rental, hotel and gas.  I don't go overboard, but I can be pretty conservative with regard to my tax return.  Others are a lot more aggressive.

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