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6 Tips for Those Looking to Make Their Summer Vacation a Real Estate Tax Write-Off

Amanda Han
Updated: June 9, 2023 4 min read
6 Tips for Those Looking to Make Their Summer Vacation a Real Estate Tax Write-Off

As an investor, I love looking at houses wherever I go. In fact, I am probably like most investors who always have real estate on their minds. Whether traveling to look for properties or managing properties while on the road, most of my travel trips undoubtedly involve some sort of “work” related to my investing.

Contrary to popular belief, just because I happen to work on my real estate during my trip does not automatically mean it’s a tax-deductible trip.

Although it is possible to take a tax deduction for part of all your travel costs, if they are business-related, you must first ensure that you have everything in place to legitimately get the write-off. Yes, I did say “legitimately.” That means that if you get audited, you have the documentation and support to win the argument over the IRS.

6 Tips for Those Looking to Make Their Summer Vacation a Real Estate Tax Write-Off

In order to make this possible, there is some action that is needed on your part before you even take your trip. Let’s take a look at an example of how Judy, an investor, can maximize her travel tax deductions.

1. Schedule appointments and plan meetings before leaving.

The sun is out, and it’s time to play. If you think you can just hand out your business cards while you are on the beach in Florida to get a tax deduction, you are definitely wrong.

In order to make your trip deductible, you need to schedule at least one business meeting or activity before leaving for your trip. The IRS wants to know that you had a “prior set business purpose” in order to write off your travel costs.

For example, if you “happened” to attend a real estate conference while in Florida, that does not mean you went to Florida for business purposes. On the other hand, if you pre-registered for this Florida conference, you can show that you went to Florida to attend this real estate conference.

return-visit-vacation-rental

This is a subtle but very important distinction. The best way to document this is by email. Emailed registration paperwork or receipts are strong documents that can help substantiate your travel “purpose.”

Example: Judy wants to take a trip to sunny Florida. Suppose she schedules multiple meetings and appointments with her business contacts and colleagues or conducts a presentation meeting with a group of other investors. In that case, the IRS can accept her trip as a tax deduction for her business.

2. Find ways to deduct on-the-road expenses.

If you want to deduct all of your travel expenses (i.e., flight or driving costs), you must travel primarily for business. According to the IRS, you can deduct 100 percent of your travel expenses as long as more than 50 percent of your trip is business-related.

Example: Judy was traveling on a five-day trip. For her, three out of five business days she spent in Florida were related to her investing business. Since more than 50 percent of her time was spent on real estate investing activities, then the entire cost of the trip would be tax deductible to Judy.

3. Remember: Every day counts for your travel expenses.

Each day you are traveling allows you to capture tax deductions. One hundred percent of your hotel, gratuity, and car rental and 50 percent of your food costs may be tax deductible.

Example: Judy is on a business trip for four days and has meetings planned with investors most of those days. She can deduct the costs for her meals and entertainment for those days. In fact, even if Judy decided to eat by herself on these days, those would still be tax deductions if the primary reason for this trip was related to her investing business.

4. Throw away those receipts.

Many people may not know that the IRS does not require you to keep receipts for certain expenses under $75 (except for your hotel). Just because you do not need receipts does not mean you don’t need to track your expenses, because the odds are high that if you don’t track your expenses, you will forget about them by next April’s tax deadline.

Example: Make sure you include expenses such as laundry, dry cleaning, tips, parking, meals, entertainment, etc. Even the first dry cleaning bill you receive when you return home may be fully tax deductible.

Related: The New Rules Of The IRA Rollover: How To Protect Your Money From The Taxman’s Penalties

5. Include a weekend in your travel plans.

If you have a business meeting on a Friday and schedule another meeting on a Monday, then you may be able to legally deduct your entire hotel and on-the-road expenses for the weekend in between.

Example: Judy has a presentation with potential investors on a Friday and scheduled follow-up appointments with the investors for Monday. Although she did not have any meetings on Saturday or Sunday, she can deduct any on-the-road expenses and hotel costs she incurs during the weekend.

6. Consult with a tax professional.

Navigating the complexities of real estate tax write-offs can be challenging, especially if you’re unfamiliar with the intricacies of tax laws. Consider consulting with a qualified tax professional to ensure that you make the most of your summer vacation as a real estate tax write-off.

A tax professional specializing in real estate investments can provide valuable insights and guidance tailored to your situation. They can help you identify additional deductions, ensure compliance with tax laws, and offer strategic advice to optimize your tax benefits. By seeking professional assistance, you can make informed decisions and potentially save more money on your taxes.

Remember, tax laws can change, and staying updated with the latest regulations is important. A tax professional can inform you about new developments and help you adapt your tax strategies accordingly.

Implementing these tips and seeking professional advice can make your summer vacation a legitimate real estate tax write-off. Take the necessary steps before, during, and after your trip to maximize your deductions and enjoy the benefits of combining business with leisure.

Do you have any awesome tax-saving stories?

Be sure to leave your comments below!

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.