Tax strategies w/o business license

2 Replies

I’m reading tax strategies for the savvy real estate investor by Amanda Han and Matthew Macfarland. They briefly mention missing deductions on tax returns such as mileage driven to visit rental properties, meals with real estate agents, writing off portions of a trip as a business expense, purchasing technology as expense related etc. Can this be tax deductible if you do NOT have a business license in place? What is the preferred method when starting property rentals; have a business license or not?

@Maira Molina

Disclaimer: I am not a tax advisor. However, I have researched a bit for my own purposes. This is an important point to discuss with your tax advisor.

In short, you can write off many things when you are engaged in business (even as a sole proprietor), however there are implications to your  income if you may leave the "passive investor" status and move into the "active investor" status. At that point in time, your income can be taxed differently. 

Good Luck!

@Maira Molina There's no "business license," in a generic sense like a medical license or a CPA license or bar license (i.e. lawyers or booze), required to start in real estate investing. You buy a property and rent it out. Before you rent though, you most likely need to apply and get a rental license and sometimes a business license and meet other requirements from your local city/town/municipal/county government to operate the rental property legally. Once you have a rental property, with the intention of operating a rental business, ready to rent and be in service, then you can start deducting business related expenses based on IRS rules as Amanda and Matthew mention.