Tips for Deducting Travel Expenses on Your Taxes
Traveling for business is often necessary when you own your own business. Landlords and property investors are no exception. Since these trips are necessary for the survival of your business, the Internal Revenue Service allows you to take certain deductions on your taxes. Learn the tips for deducting long distance and local travel expenses.
Reasons Landlords and Property Investors May Travel
The following are some reasons a landlord or property investor may need to travel:
- Driving to and From Investment Property
- Showing Rental to Prospective Tenants
- Business Meeting With Potential Investors
- To Scout Out New Properties
- To Sign Contracts
- Property Investing Seminar
Deducting Travel Expenses Solely for Business
There will be certain times when you travel when the sole purpose is to fulfill a business obligation. Whether it is a lunch meeting or a trip to view a new property that has come on the market, you would not have made this trip if you were not a landlord or property investor.
You can deduct these travel expenses that are considered solely for business on your taxes. The expenses you can deduct must also be considered “ordinary and necessary” in your course of business. For example, driving to the supermarket would most likely not be a necessary expense for a landlord, however it could be necessary for a baker who needs to buy flour.
Deducting Travel Expenses for Business and Pleasure
There will be other times when you travel when the goal is to mix business with pleasure. You may be taking a family trip to Hawaii, but while you are there you want to take a look at vacation rentals as potential investments.
You can still deduct certain expenses on this type of trip. In this case, you must separate the trip into expenses incurred for business and expenses incurred for pleasure. You must only deduct the expenses for business on your taxes.
Keep Detailed Records
It is very important to keep detailed logs and documentation of all travel for business purposes. You should log:
- The purpose of the trip,
- Miles driven (if you drove)
- Any expenses (gas, lodging, meals, etc.) incurred.
- You need to keep any receipts for this business travel. If you are ever audited, the I.R.S. will want you to provide proof of all of your income and expenses.
Local Travel Expenses
If you own an automobile that you use for business, you are able to deduct the cost of business-related travel. This will include things such as traveling to a hardware store to pick up supplies for your property or traveling to a meeting with potential investors.
There are two different options for taking the automobile deduction. You may use either the standard mileage rate or the actual expenses incurred. The standard mileage rate involves deducting miles driven for business use, while actual expenses involve deducting the business portion of expenses, such as gasoline and repairs.
Long Distance or Overnight Travel Expenses
If you have to make long distance travel for business, you can deduct certain expenses. Be more careful when deducting these expenses, because the I.R.S looks more closely at deductions taken for long distance or overnight travel.
You must meet two conditions to be able to take the overnight travel expense:
- Your business must require you to be away from home for longer than a day’s work.
- Sleep is necessary for you to properly perform your work.
If you meet these conditions, you can deduct expenses including:
- Transportation Costs- This includes things such as airfare, train fare, bus fare, cost of a rental car and expenses related to using your own car.
- Hotel Expenses- This is the lodging that would allow you to sleep.
- Meals- However, you can only deduct 50% of the cost of your meals.
- Entertainment- You can only deduct entertainment that is directly related to business. For example, hosting clients at the theater or a social or athletic club. Taking your family to see Cirque de Soleil would not be a business-related travel expense.
- Dry Cleaning.
- Phone Calls or Faxes.
You should always consult the IRS or a certified accountant to decide what deductions are applicable to your specific situation.