Expenses While Traveling to a Rental
When are travel expenses deductible?
Primary Purpose Must Be Business: The trip's main goal must be for your rental activity. This means you need to have a rental purpose in mind before traveling and actually perform business activities while you're there (e.g., dealing with tenants, maintenance, repairs, showing the property, getting supplies, attending landlord-related classes). If more than half of your trip involves personal activities, your transportation expenses generally aren't deductible.
"Away from Home" Overnight: To deduct travel expenses, you generally need to be "away from your tax home" overnight, or at least long enough to require a stop for sleep or rest. Your "tax home" is usually the city or general area where your main place of business is located.
Ordinary and Necessary: The expenses must be helpful and appropriate for your rental activity, not necessarily indispensable, and not lavish or extravagant.
What travel expenses are deductible?
Transportation: This includes airfare, train or bus tickets, car rentals, and mileage if you use your personal vehicle (you can choose between the standard mileage rate or actual expenses like gas, oil, etc.). This also covers costs like taxis, rideshares, and airport shuttles.
Lodging: Hotel or other lodging expenses for the days you are working on your rental activity.
Meals: Generally, 50% of meal and beverage expenses incurred while traveling for business
Other Expenses: This can include telephone/internet expenses, computer rental fees, laundry/dry cleaning, and tips related to any of the above.
Important Limitations and Exceptions:
Improvements vs. Repairs: Travel expenses for improvements (e.g., remodeling, renovating) are generally not immediately deductible. Instead, they are considered capital expenses and are added to the property's basis, then recovered through depreciation over time. Travel for repairs and maintenance is deductible.
New Property Acquisition: Travel costs incurred to investigate or acquire a new rental property are generally considered "start-up costs" or "acquisition costs" and may need to be capitalized and depreciated, rather than immediately deducted. Once you own the property, travel for business related to that property becomes deductible.
Personal Portion of Trip: If you combine business with pleasure, you can only deduct the portion of the trip directly related to your rental business. For example, if you stay extra days for vacation, those personal lodging and meal expenses are not deductible.
Family Members: Travel costs for a spouse, partner, or children are generally not deductible unless they are employees of your business and traveling for a legitimate business purpose.
Record Keeping: Meticulous record-keeping is crucial. You should keep receipts for all expenses, a log of mileage, notes on the business purpose for each trip and expense, and proof of the business activities conducted.
