The Investor’s Complete Guide to Deducting Travel Expenses

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Running a real estate business, whether it be flipping, wholesaling, or landlording, often requires plenty of travel. Whether by car or plane, costs can add up. You have probably wondered before how (if) you can deduct your transportation expenses. The answer to that question is the classic CPA answer: it depends.

Deductibility of travel expenses first depends on where you are traveling. Specifically, you must determine whether you are traveling “locally” or “non-locally,” which requires you to understand what your “tax home” consists of. Your tax home is the general area in which your principal place of business occurs for your rental activities. This can be where the property is located, or where your primary residence is located.

For instance, I live in Washington, D.C. and own a rental in North Carolina. My primary place of business for that rental activity is Washington, D.C. because that’s where the business is actually conducted by the owner (me).

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Local Travel (Inside Your Tax Home)

If you are traveling to a rental that is located in your tax home, there are stringent guidelines to follow to determine whether or not your travel costs are deductible. If you have a home office, travel costs between your home and rental will be deductible.

Related: A CPA Answers: How Can Investors Maximize Car-Related Tax Deductions?

However, if you do not have a home office, you will be subject to the commuter rule. Commuting expenses are personal expenses and therefore not deductible in your rental business. If you do not have a home office, the IRS takes the stance that your rental property is your “office,” and therefore you are simply commuting to and from work.

To get around this, if you don’t have a home office but work a W2 job, go straight to the rental after work, as you will be traveling from your main office to your second office, a deductible business expense. Additionally, once you reach the rental (whether you came from your home or not), you may deduct all travel expenses related to the rental activity. So if you run to the hardware store, that trip is deductible.

Non-Local Travel (Outside Your Tax Home)

For tax purposes, you may deduct virtually all of your travel expenses related to travel outside of your tax home. There are two key criteria to deduct this type of travel: you must travel outside your tax home and you must stay overnight at least one night. If you do not stay overnight, the trip is not considered “travel.”

The travel must be ordinary and necessary for your business, meaning during your trip, your rental business needs to be top of mind. You must also spend more than half of your trip working in or on your business in order for your transportation expenses to be deductible. If you spend more days on a personal vacation than you do working on your rental business, your expenses will not be deductible.

You may not deduct travel costs incurred before you are actually in business. These costs will be treated one of two ways: they will be added to the basis of the property once purchased or deducted as a start-up cost once you are in business. Travel costs incurred as a result of a successful trip (meaning you bought a property as a result) are added to the basis of the property and depreciated over the life of the property. Travel costs incurred as a result of unsuccessful trips will accumulate and be deducted via start-up expenses (limited to $5,000) once you are actually in business.

What Expenses Are Deductible?

Your expenses may not be lavish or extravagant related to the business you are operating. For most of us, that means we can’t deduct the cost of a first class ticket or the lodging costs of the penthouse suite. That said, you can deduct ticket fares for airplanes, trains, or buses. You can also deduct the cost of luggage and public transportation.

You may deduct 50% of your meals if a business conversation occurred immediately before, during or after the meal. You will have the burden of proof, so make sure to always keep your receipt. You may also deduct 50% of your entertainment expenses; however, you will likely need to prove to the IRS that the entertainment was justified by the business you run. Typically as landlords, we’d have a hard time justifying entertainment expenses.

You may also deduct the costs of telephone, internet, laundry, computer rentals, and tips paid to various vendors.

Keep Solid Documentation

You need to create a paper trail. Travel and transportation expenses are an area IRS auditors love to target because they are easy to overstate. The burden of proof will be on you, the taxpayer, to prove to the auditor that you did indeed incur such costs.

Some key ways to do this will be to accept business cards of the individuals you meet with. You can also keep a daily log or calendar and write on them what you did each day during your travel. I’d also suggest that you keep agendas of meetings you attend, as well as copies of rental related correspondence.

You should also keep receipts for meals you plan on deducting. On the top of the receipt, write the name of the person you met with, what their role in your business is (i.e. property manager, contractor, realtor), and jot down a note or two about what your discussed immediately before, during or after your meal.

Related: How to Deduct Travel Expenses by Investing in Places You Vacation

In terms of mileage, be sure to write down the odometer reading at the beginning of the year (this is key). Each time you travel in your vehicle, you need to record the date, beginning address, ending address, purpose of trip, who you met with (and their role in your business), and mileage incurred. I tell my clients not to sum mileage into a “round trip” and rather report each trip individually. For example, instead of saying “roundtrip point A to point B was 20 miles,” you should say “point A to point B was 10 miles” and “point B to point A was 10 miles.”

Conclusion

I hope this helps shed some light on deducting travel related expenses. The key is to understand the difference between deducting local and non-local travel and to keep bulletproof documentation.

Investors: Have any questions about what you can deduct when it comes to travel expenses?

Be sure to leave your comments below!

About Author

Brandon Hall

Brandon Hall, owner of The Real Estate CPA, is an entrepreneur at heart who happens to be good at taxes. Brandon is a real estate investor and CPA specializing in providing business advice and creative tax strategies for real estate investors. Brandon's Big 4 and personal investing experiences allow him to provide unique advice to each of his clients. Sign up for my FREE NEWSLETTER to receive tips and updates related to business and taxes.

24 Comments

    • Brandon Hall

      Hey Joan,

      As long as the travel is not related to education you are undertaking to learn a new “trade or business” then the travel will be deductible per the rules I outlined in my article.

      Thanks for reading!

  1. Darren Sager

    Hey Brandon! Great article. Brandon Turner turned me on to Automatic, a device that plugs into your car’s OBD2 port. It tracks every trip I take through my iPhone and then using another app called IFTTT (If This Then That) it automatically sends each trip into a Google Doc so I don’t have to write down ANY trip or where I went to. It shows all the information without any additional monthly fees. Absolutely wonderful. Can’t tell you how many times I didn’t write trips down and lost mileage. With this great device it paid for itself in no time! In my mind it’s priceless and it will always be there.

  2. Joe Semifero

    Brandon – I remember some time ago hearing or reading about how to deduct travel expenses. While I understand the, “must spend more than half of a trip on business related activities,” there were a number of other items that were included.

    For instance, there was an allowance of a travel day at the beginning and end of a trip. There were allowances for weekend days not counting, either. In addition, there were requirements for amount of time that had to be spent in a given day to be considered a work day. The idea was if you traveled on a Friday morning and then had the weekend off, work Monday to Wednesday, took Thursday and Friday as “vacation” along with the weekend, and then Monday evening as a travel day, you could potentially have three work days that would allow you to travel to the locale of your choice for 10-11 days and deduct the cost. This, of course, sounds highly optimistic, but I’m wondering if you know anything of these types of rules for travel being deductible?

    • Brandon Hall

      Hey Joe – thanks for commenting and reading. Yes there are additional rules, most commonly you should count on spending 4 hours on a rental activity for it to count as a business day. Generally, travel days count as business days. Additionally, you can count Saturdays and Sundays only if you work on your rental activities on Friday and Monday and it isn’t feasible to travel back home for those two days.

      Hope this helped.

  3. Joseph Adelmann

    Hey Brandon,
    This is a very informative article, especially for someone just getting started. How do travel deductions work in house-hacking situations? Expanding on that, have you written any articles on deductions related to owner-occupied multi-unit rental properties? Thanks again!

    • Brandon Hall

      Hey Joseph – thanks for reading and commenting. Travel deductions won’t work for house hacking situations unless you can create a paper trail that shows you were working on your rental and traveled somewhere yo pick up supplies. I have not yet written an article on deductions related to house hacking, but I think that’s a great idea so I certainly will.

  4. Reed Starkey

    Great post brandon.

    I have a rei boot camp I will soon be attending. I would like to stay extra days. I would like to plan this to be as tax deductible as possible. The camp is all day Friday Saturday and Sunday. Any thoughts?

    Also you mention deducting individual miles for local travel. I have my company pay all of my vehicle expenses as I only use it for business. Is that also acceptable?

    • Brandon Hall

      Hey Reed, thanks for commenting! Is your REI bootcamp outside of your tax home? If so, the mileage and travel expenses may very well be deductible.

      If you are using your car in your business, generally, the same rules apply. You would just report your vehicle on schedule E or C.

  5. Hi Brandon, excellent article. The information related to local travel is especially valuable to me. I have a full time W-2 job which is about 15 miles from my primary residence. My rentals are 4 miles away from my primary residence. Does it mean that I could drive by my rentals every day on my way home from work and deduct the one-way mileage from work place to rentals? Thanks again!

    • Brandon Hall

      Hey Bill – thanks for commenting and reading. Your trips to your rentals need to have a business purpose. For instance, you can’t just re-adjust your commute to “drive-by.” You need a good reason to go out there. Maybe you are making repairs, checking on tenants, inspecting something.

      But yes, your mileage from work to the rentals will be deductible. Hope this helps!

  6. Rick C.

    Hi Brandon – Great article. I am a bit unclear on the meals part though, so I have two questions:

    1. If I go to a coffee shop and do work on my laptop related to my real estate business (locally or non-locally), what amount of that is deductible?

    2. If I have a meal on a trip that is strictly related to my real estate business, but that meal is done during a time of day when I am not meeting with anyone, is that deductible?

    • Brandon Hall

      Hey Rick – thanks for reading and commenting. The first question needs more information but the answer to #2 is yes. Feel free to message me – for some reason I’m not receiving email updates when people comment on my posts.

  7. Daria B.

    Hi Brandon-

    Just catching up on your tax articles. Great information.

    A question on the ‘home office’:

    You said if there is no home office, “you will be subject to the commuter rule.”. In essence, unable to deduct.

    But then you said, in the next paragraph:

    “To get around this, if you don’t have a home office but work a W2 job, go straight to the rental after work, as you will be traveling from your main office to your second office, a deductible business expense. Additionally, once you reach the rental (whether you came from your home or not), you may deduct all travel expenses related to the rental activity. So if you run to the hardware store, that trip is deductible.”

    I’m conflicted over these 2 statements, they seem to be saying “no you can’t do it” but then “yes you can IF you meet this criteria”. The latter fits into what I do (in-town). I log every travel point with a description of who I met at the rental or what I did at the rental (ie turnover, clean, fix).

    When we talked about home office I understood there should be a place in the home designated as an “office” so that the commute deductions would be valid. This seems as though a home office isn’t required to be able to deduct the travel (in-town).

    For the out of town travel, to confirm, the air plane ticket, rental car, gas for rental, 50% of meals (if justified by meeting the contractor or other business entity related to the property), hotel stay (more than 1 night) are all deductible. How about the meals in the airport when traveling to and from the property? Since there would be no meeting with a business entity – I take it that “no” the meals cannot be deducted.

    Thanks
    -Daria

    • Brandon Hall

      Daria – what I meant was if you do not have a home office, any trip from home to the rental will be considered a personal commute. A trip from home to your place of work is also considered a commute. BUT, if you travel from home to your place of work (a commute) THEN travel from your place of work to your rental, that is a business trip (since you are not going between a place of work and home).

      So if you don’t have a home office, strategically plan your trips to your rental to occur on your way home from work.

      Additionally, once you are at the rental (even if you “commuted” from home) any trip you take from the rental to a hardware store or another location in relation to the business, that’s a business expense.

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