Rental Property Investor · KY · Member since 2013 · 1k+ posts · 537 votes
I've done a little reading on making trips/vacations tax deductible, but I'm still not totally clear.
I am going to visit an out-of-state turnkey provider as part of my due diligence process to meet them and see their operation. They are about 6.5 hours away from me. I am leaving on a Thursday, driving 6.5 hours, and staying the night at a local AirBnB. On that Friday, I am meeting with the provider in the morning for several hours. When our meeting concludes, I will be checking out the town, staying over at the same AirBnB, and driving home that Saturday.
I know there are some requirements on the number of hours of business activity, etc. I believe all my mileage is deductible. I want to confirm this and see whether meals and lodging are also deductible. I, of course, will save all receipts.
Anyone want to take a stab at this?
CPA · Raleigh, NC · Member since 2013 · 1k+ posts · 2k+ votes
9y
@Mark S. I'm on the other side of the coin. Everything I've ever read and the court cases I've followed have dictated that these expenses are not deductible unless you actually purchase rental property in the area in which you travel to. Until then, the costs are capitalized and just "hang out" on your balance sheet.
Otherwise you'd be able to travel anywhere in the world and "look at rental properties" and deduct your costs.
That said, we sometimes deduct the cost if we can find reason to do so.
This is a little overkill but I thought it might help others to include vacation info
You may deduct 100% of your transportation expenses only if you spend more than 50% of your time on rental activities while at your destination. In other words, your rental activity days must outnumber your personal days. If you spend more time on personal activities than on rental activities, you get no transportation deduction. You may also deduct the destination expenses you incur on days when you do rental-related tasks such as the hotel bill, 50% of meals, parking ect . Expenses incurred on personal days at your destination are nondeductible. If your trip is primarily a vacation, more than 50% personal activities, the entire cost of the trip is a nondeductible. As long as your trip is primarily for your rental activity, you can add a vacation to the end of the trip, make a side trip purely for fun, or even enjoy evenings doing vacation activates, and still deduct your entire airfare, rental car, or standard mileage rate if using your own car. A hint to those taking kids to theme parks. Most the parks stay open till 11 or 12 midnight and it’s a lot cooler and less crowded in the evenings so leave the wife and kids at the pool in the hotel during the day and hit the parks at night. What you spend while having fun is obviously not deductible, but you can deduct all of your expenses while conducting rental activities. Another example, if you like to go to a particular ski resort a couple times a year. You buy a couple of rentals in and around the resort. Then take 3 days repair or improve the property, meet with the property manager, accountants, or lawyers about property then put in 2 days skiing. You can write off 100% of your travel but only 3 of the 5 days hotel stay and 50% of the meals and beverages during the first 3 days. Be careful looking at new properties might be considered “investor” activities so even if your looking at new deals while your there make sure you are also conducting other “rental related activates".
Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
9y
Yes, you can do actual expenses for the driving (gas, etc.) or you can deduct mileage (smarter, because it equates to more). Lodging you can also do actual or per diem allotted amounts.. Then same for meals and such, either deduct the actuals or you can use the per diem allotted amounts for the "meals and incidentals". As far as the time, you don't have to get as specific as the number of hours. If 100% of the reason you are going there and what you are doing (minus like dinner or going out that night, etc.) is real estate based, then use 100% of the per diem amounts if you use those. If you went on a trip where half of it was for real estate stuff and half was for something else, use 50% of the per diems.
If that makes sense. Note- I'm not a tax professional. Don't take my word for anything, consult a licensed expert.
Rental Property Investor · KY · Member since 2013 · 1k+ posts · 537 votes
9y
@Cameron Skinner, you lost me, but I think I get the gist. Still a bit unclear for my situation, though.
@Ali Boone, I think you're right about deducting the mileage, but I'm not really sure about meals lodging and if I get to deduct lodging, whether it'd be for just the first night or both.
Rental Property Investor · KY · Member since 2013 · 1k+ posts · 537 votes
9y
Cameron Skinner , lodging for both nights? I have to stay the first night due to the driving distance to be able to meet the TK provider the next morning. Depending on what time we finish up that Friday, I COULD possibly drive home that day, but am choosing to stay overnight again. Would that second night also be deductible?
Also, if I travel with significant other, are 50% of her meals deductible too, or just mine?
Investor · Panama City, FL · Member since 2015 · 378 posts · 183 votes
9y
@Mark S. you can take both nights. Traveling with a spouse or a partner in regards to meals get a little gray, it's one of those vague rules "is the expense reasonable and ordinary" It's a good idea to get them involved so there is no question, for example my wife does the books and picks colors and finishes.
CPA · Raleigh, NC · Member since 2013 · 1k+ posts · 2k+ votes
9y
@Mark S. I'm on the other side of the coin. Everything I've ever read and the court cases I've followed have dictated that these expenses are not deductible unless you actually purchase rental property in the area in which you travel to. Until then, the costs are capitalized and just "hang out" on your balance sheet.
Otherwise you'd be able to travel anywhere in the world and "look at rental properties" and deduct your costs.
That said, we sometimes deduct the cost if we can find reason to do so.
Investor · Panama City, FL · Member since 2015 · 378 posts · 183 votes
9y
@Brandon Hall, I answered a bunch of questions late last night but I did put a disclaimer in my original answer "Be careful looking at new properties might be considered “investor” activities so even if your looking at new deals while your there make sure you are also conducting other “rental related activities".
Just wanted to make sure you young guys know this old guy still has a few moves, when I'm fully awake, and actually reads the question!