How to Deduct Travel Expenses by Investing in Places You Vacation

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Everyone’s strategy for purchasing rental real estate is a bit different. Some investors like to find properties close to home so they can keep an eye out for any problems. Others like to buy properties that are as far away as possible so that the investment can remain passive and hassle-free.

Everyone’s strategy is tailored to fit their own budget and preference. My favorite strategy when it comes to tax savings is buying rentals in places that you visit often. Now, I am not saying you must buy in a place that you love to vacation — that could be one of the worst ways to invest. It is important to look at each investment for what it is: an investment property. But if the numbers make sense, then why not buy investment property in locations where you visit often?

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What Travel Expenses Qualify as Deductions?

A few years ago, two of our clients, Ray and Shirley, were absolutely insistent that they could not deduct a single travel expense for any of their three rentals. Why? Well, they had three kids who all lived in different parts of the country, so they decided to buy all of their rentals in the cities that their children lived in. This way they could kill two birds with one stone every time they flew back East: check in on their properties a few times a year and visit their kids and growing grandkids. Therefore, they felt that their trips were personal and completely non-deductible.

Related: How to Deduct 100% of Your Meal and Entertainment Expenses

Before ruling out travel expenses altogether, Ray and Shirley should take a quick quiz to see if their expenses qualified as deductions:

  • Was the primary reason for the trip to visit their rentals?
  • Did they spend more than 50% of their trip doing business?
  • Did they have meetings or appointments in place before they left?

Ray and Shirley answered “yes” to all of these questions, confirming that their travel expenses were indeed business-related. They admitted that there was generally a rental-related reason for the trips in the first place, either to meet with their property managers or sometimes to assess damage done to their rentals. They would generally spend a few days in town dealing with any business issues and then would spend their last day in town with their family before flying home the next day. They were thrilled to find out that they were actually able to deduct their airfare, hotel, rental car, and meal expenses, despite the fact that they were visiting family.

Taking Business Vacations

Our client Erin on the other hand took a different approach to selecting her rental property. Before she invested in real estate, she worked in a call center in a big city for an internet company. She had always wanted to go to Hawaii, but with her small salary and her college loans out of deferral, she could never scrape up enough money to take her dream vacation.

Years later, when Erin eventually got her foot in the door of the real estate business, she finally took her long-awaited vacation to Hawaii, and instead of coming home with souvenirs, she came home with a new rental property. While this property was not her most lucrative investment, it was by far her favorite for the sole reason that she could to go back to Hawaii every year. Like Ray and Shirley, she would spend a few days working out details, repairs, and issues at her rental and would then spend the remainder of her trip doing all of the snorkeling, surfing, tanning, and eating that she could possibly fit in. The best part was that her hotel, airfare, rental car, and meals were all deductible since they were all business-related.

Conclusion

So as you can see, with a little preparation you can plan your business around your vacations so that you can work and relax at the same time — because, let’s be honest, the work doesn’t really ever stop as an investor. Just keep in mind that the primary reason for your trip needs to be business-related. You need to have meetings set up prior to your departure, and you need to spend majority of your trip conducting business. What you do on your days off is up to you!

Related: What Can I Deduct? The Answer That Will Save You on Real Estate Taxes

Another great tip is that travel days count as business days, so don’t think that the work needs to start the second you step off of the plane. Instead of rushing straight to your property manager’s office, you can spend that first afternoon lounging by the pool or enjoying dinner with your family and save the work until the next day of your trip.

Perhaps instead of buying that next rental close to home, you might instead pick a condo near where your son attends college, or you might buy a rental home in California if you’ve always wanted to vacation there. The possibilities are endless when it comes to real estate, so why not get more out of your property than just a good profit?

Do you combine vacation time with business-related travel?

Leave a comment below, and let’s talk tax deductions!

About Author

Amanda Han

Amanda Han of Keystone CPA is a tax strategist who specializes in creating cutting-edge tax saving strategies for real estate investors. As real estate investors herself, Amanda has an in-depth understanding of the various aspects of investing including taxation, self-directed investing, entity structuring, and money-raising.

34 Comments

  1. Hi Amanda,
    Thanks for your all your posts. How about if I own a tax lien or a note on a property in a location? Could travel expenses be deducted to say visually inspect the property and do market research in the neighborhood/area to determine value in the event of having to exit through the property? Thanks!

  2. Hi Amanda,
    Great article. I enjoyed your podcast a while back as well.
    Quick question. Hyoithetically I plan on going to Hawaii to investigate rental property I would work more than the 50% of the time on business. I understand my travel expenses are deductible. What if my spouse comes with me? Are her expenses deductible as well? She is not active in the business but her input and opinion is very valuable to me.
    Thanks!

    • Amanda Han

      Hi Jerry: Assuming your wife is staying in the same hotel room with you, you would can still deduct the entire hotel cost even though wife did not need to be there. In order to deduct her flight and other expenses incurred specifically for her, you would need to show that it was necessary for her to be there with you and that she was doing something for the business as well. On a side note…glad to hear that your wife’s input is very important to you….now just need to make sure my husband reads your comment here. =)

  3. Hi Amanda, thank you for the post. Excellent advice!

    Quick question related to investment in a foreign country: If my wife and I go to Caribbean and spend more than half of our time there investigating real estate properties (we want to buy one as a rental investment), but possibly at the end of the trip we don’t find a good deal so we decide not to buy anything, can we still deduct the travel expenses for that trip? Also we have a LLC doing small wholesale business (not related to real estate investment), can we deduct the travel expenses from our income of LLC? We also have employment income.

    Your help is truly appreciated!

    • Amanda Han

      Hi Jason:

      This would be a grey area especially given the caribbeans is a popular travel destination. I think the answer will depend heavily upon how extensive your working time is while you are there. The days you spend on actual real estate related work should be tax deductible…you just want to make sure you connect with your CPA in advance to work out the details on getting as much tax deduction out of the trip as legally possible.

      same applies to wholesale income…if you are wholesaling deals in caribbeans then the travel may be deductible against that income as well.

      • carol Lyons

        Hi Amanda,

        Great article. Can you please provide some clarification on new rental locations (new city, state, etc.) in relation to business expense?

        I was under the impression that you could not claim these expenses (search expense) as regular business expenses, but they could be amortized as start-up cost when a property in the area was purchased.

        I currently own one multi-family in one state but am looking into properties in another.

        Thanks,
        Carol

    • Amanda Han

      Hi Abraham:

      Yes potentially you can use the same strategy…..you just want to make sure you connect with your CPA in advance to work out the details on getting as much tax deduction out of the trip as legally possible.

  4. Nick Lee

    Another Great post by Amanda. This is one that will surely get lots of interest.
    I would recommend everybody who hasn’t done already listen Amanda’s pod cast. Lots of great hints and tips, especially for us new guys.
    Wonder if I can deduct expenses for a trip to Florida if I own building plots and looking at more? Or is it just houses condos etc?

  5. Is 100% of your hotel cost deductible if 51% of your time is there for business? Also, what increments are time measured in, and do weekends count?

    Examples, given a rental property owned in Hawaii:

    1) I’m in a hotel in Hawaii for 14 days. I work for 8 of those days (ignore weekends for the moment). Are all 14 days’ hotel costs deductable?

    2) I’m in a hotel in Hawaii for 14 days. I work M-F in week 1, and Monday in week 2. ( >50% of working days). Are all 14 days’ hotel costs deductable?

    3) I’m in a hotel in Hawaii for 14 days. I work for 2 hours on each of 8 weekdays. Are all 14 days’ hotel costs deductable?

    4) For fun, let’s apply the same to food, rental cars, etc.

    • Amanda Han

      Hi Mark:

      The travel expenses are generally all tax deductible if more than 50% of your time is for pre-determined business purposes. Meals are generally limited to the 50% limitation in most cases.

      Of course…there are always exceptions to the rule so you just want to make sure you connect with your CPA in advance to work out the details on getting as much tax deduction out of the trip as legally possible.

  6. Frank Anastasi on

    Hi Amanda,

    Are there limitations with respect to your income and what you can deduct? For example, if an individual (part-time) investor has an annual income of $150K+ from their full-time job, can he/she still claim the deductions you discussed?

    • Amanda Han

      Hi Frank:

      There are no limitations with respect to using rental expenses to offset rental income. The limitation you reference is if there are rental losses in excess of rental income. In those situations, those excess losses may be limited if you are of high income and cannot claim real estate professional. If this is an issue for you then definitely work with your tax advisor on potential strategies to use these excess losses.

  7. Hi Amanda,

    Love the article. It’s an awesome idea! I’m aware meals would be subject to the 50% limitation rule. I’m fairly confident that 100% of the airfare would be tax deductible if the trip is 50% business related.

    Just a few questions.

    1. Can you deduct 100% of the rental car expenses?
    2. Can you deduct 100% of the hotel expenses?

  8. cheryl c.

    Nice Article! We have been taking advantage of these deductions for over 20 yrs. We live in Virginia and have 3 rentals in SW FL and 2 on Cape Cod – it’s really tough to have to visit these places a few times a year! We actually combined another tax-favored transaction and used a 1031 when selling a long-term rental in Virginia to buy our future winter home in Naples . I will be converting it to personal next year!

  9. Deshan Kennedy

    Hello Amanda, thank you for your article. I was wondering if it was best to schedule to plan your trips from Thursday to Tuesday and if since you have to stay in the area over the weekend, would all of your expenses be tax deductible on Saturday and Sunday? My wife is my partner in the business so I’m assuming that majority (if not all) expenses would be deductible but we wanted to see when it would be best to plan our trips.

    • Frank Anastasi on

      Hi Amanda,

      Are there limitations as to what you can take as a tax deduction (i.e. hotel, rental car expenses, airfare, etc.) if you are a new part-time investor searching for your first investment property and you have a full-time job in another industry making a substantial income?

    • Amanda Han

      Hi Deshan:

      In that scenario, your hotel stays may be tax deductible. however personal expenses are what you have to pay attention to. for example, going to Disneyland would not be deductible unless if that had a business purpose.

  10. Hi Amanda,

    My wife and I purchased a California vacation rental in Jan. 2015. It is turning out to be a good vacation rental investment, with lots of activity and will not qualify as a residence. In late November 2014, we put in an offer to purchase the vacation rental sight unseen. In December 2015, we traveled from our home in Wisconsin to this rental property in California for the sole purpose of examining/inspecting the property and had a home inspection of the property. We stayed at the property 3 nights, 2 of which were comped by the seller and one of which we paid along with the cleaning fees. As I previously mentioned, we ended up purchasing the vacation rental and are now actively renting it. The closing occurred in Jan. 2015. Wondering if we can deduct our travel expenses in December 2014 on our 2014 taxes? And how about our Home Inspection expense? Or is this something that should be deducted from our 2015 taxes as the sale did not occur until 2015? Or do we not get to deduct theses expenses at all? You insight is greatly appreciated.

    Ron

  11. NA NA

    Hello Amanda,

    Extremely appreciate seeing this article from you. Along with a few others above, I have a hypothetical scenario which may become real (or similar) based on your answer. Let’s say I invest in the stock of Microsoft (or any other company) this month. If I take a trip to the state of Washington next month and visit Microsoft headquarters while I’m there (i.e.; take a tour, go to the Microsoft store on-site, etc.), can the expenses for that trip be deducted?

    In a similar scenario, if I’m potentially interested to invest in, say, UnderArmour clothing company in Baltimore, Maryland. If I take a trip to the state of Maryland to do a site visit (i.e.; tour, store, etc.) while I’m still in the status as a potential investor, can the expenses for that trip be deducted?

    Definitely appreciate any answers you can offer.

    Sincerely,
    P.A. (somehow, my Profile Name initials got recorded incorrectly as NA)

  12. Amanda Han

    Hi Na Na,

    Stock investment and the trip is not likely to hold up in audit….it depends on if you can argue that it’s necessary for you to go see the place before making the investment…stocks are different from RE in that perspective.

    You may have a better argument for RE investments and businesses that you will run as it is common for people to want to see the location. etc.

    The main thing is to make sure you have plenty of documentation and that the business items are pre-planning prior to leaving for the trip.

    Thanks!

  13. NA NA

    Amanda!

    Thank you so much. Really appreciate your answer about a trip as a prospective stock investor may not hold up in an audit or pass acceptably for the IRS.

    So, for the initial scenario I described as a current stock investor, would a trip to the company of whom I’m already invested (i.e.; for a tour, physical in-person purchases, stockholder or other meeting(s), etc.) be a trip for which expenses can be deducted?

    Sincerely,
    P.A.

  14. Charles Marquez

    Hi Amanda,

    I recently purchased property on East Coast with intention of developing as a rental property. I would like to fly to inspect my property and do feasibility to develop. What is deductible? Flying from West Coast. Should I set up business or okay as individual. Thank you.

  15. Debbie Wilson on

    Hi Amanda,
    We own a cabin in Oklahoma, when we come to check on property, making repairs or improvements we stay in the cabin, can we deduct the fair market cost of what the cabin costs to rent? We stay there because it is fairly remote and the nearest city is about 40 minutes away.

  16. Hi Amanda. I just now came across your article, “How to Deduct Travel Expenses by Investing in Places You Vacation”. Great article. Although my circumstances don’t exactly match the title of the article, I would like to know if we can deduct our travel expenses. We traveled out of state to inspect some land and possibly purchase it. This land happens to be located outside of my original hometown. We rented a car and stayed at a motel. We had an appointment to inspect the land, and another appointment to complete paperwork and make a down payment. We are buying the property. The only purpose of the trip was to inspect the land and possibly buy it. We did visit with my family while we were there. Our plan is to move there next year and live on the property in temporary housing such as a travel trailer, motor home, etc., while our home is built. Can we deduct our car rental, motel, and meal expenses for this business trip?
    Thanks

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