travel and transportation expenses related to rental property are deductible

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How to (Legally) Deduct Rental Property Travel Expenses

Tax law in the U.S. can be extremely friendly to real estate investors. Rental property owners can deduct normal operating expenses, and use depreciation to reduce taxable net income. Another benefit of owning rental real estate is deducting travel expenses.

However, there’s a right way and a wrong way to claim travel expenses on your tax return. In this article, we’ll explain how rental property travel expenses work, along with some of the most common travel expense deductions for real estate investors. After all, tax deductions are often seen as one of the biggest benefits of owning real estate.

Note: this is not tax advice and we recommend you speak with your CPA to understand your specific situation.

Can Landlords Deduct Travel Expenses?

Landlords can deduct travel expenses when traveling to visit a remote real estate investment in another market and for going to a property you own locally. 

However, the IRS knows that travel expenses are one of the most abused deductions for business people, so it’s important to play by the rules before claiming a deduction for rental property travel expenses.

IRS and Travel Expense Deductions

According to IRS Publication 527 , Residential Rental Property:

“You can deduct the ordinary and necessary expenses of traveling away from home if the primary purpose of the trip is to collect rental income or to manage, conserve, or maintain your rental property. You must properly allocate your expenses between rental and nonrental activities. You can’t deduct the cost of traveling away from home if the primary purpose of the trip is to improve the property. The cost of improvements is recovered by taking depreciation.”

The IRS also provides additional guidance for travel expense deductions in Publication 463 .

Travel Expense Rules of Thumb

If you’re ever in doubt about whether a specific travel expense is deductible, it’s always a good idea to get professional advice from your accountant or CPA. With that in mind, here are some rules of thumb to follow to help understand if an expense incurred when traveling can be deducted on your tax return:

• Purpose of travel must be mainly for business and have a clear business purpose.
• Majority of the travel time must be spent on your rental business rather than leisure.
• Travel expenses must be “ordinary and necessary” for your real estate business but not overdone, such as staying in a 5-star resort versus an Airbnb or VRBO when going out of town.
• Rental activity like showing the property to prospective tenants or doing an inspection is also a deductible travel expense, provided that was the main reason for traveling.
• Traveling to conduct repairs and maintenance is deductible, but traveling to the property to make a capital improvement such as replacing the HVAC or installing a new roof is not a deductible expense.

Common Rental Property Travel Expense Deductions

Your travel expenses and the reason for taking a trip must have a logical connection to your rental property business. 

A good way to decide whether or not a travel expense is legitimate is to use common sense. For example, if your wife or partner says something along the lines of, “Wow, I didn’t know this was deductible!” you may want to think twice before claiming the travel expense.

Now, let’s take a look at some of the common rental property travel expense deductions real estate investors can claim:

• Expenses traveling to and from the airport, such as a taxi or Uber.
• Airfare, train, or bus fare.
• Car rental expenses and associated costs such as parking fees or tolls.
• Travel to a Home Depot or Lowes to shop for materials and supplies to be used for your rental property.
• Traveling to the property to show it to prospective tenants.
• Travel expenses incurred to interview or meet with members of your local real estate team, such as an accountant, attorney, leasing agent, property manager, lender, or general contractor.
• Costs of traveling to an event or meeting for continuing education purposes, such as a seminar, trade show, or convention.
• Shipping costs for luggage or items required for your rental property business.
• Lodging expenses and 50% of meal and beverage expenses incurred while you are traveling outside of your home market.
• Tips paid for service in conjunction with travel to your rental property.
• Miscellaneous expenses such as laundry and dry cleaning, groceries, computer rental fees, or internet charges.

Travel Expenses to a New Rental Market

A recent post on the Stessa blog explains how travel expenses are treated differently when going to a new market to investigate potential rental property to invest in. 

For example, let’s say you’ve been researching the Austin real estate market on the internet and know it’s one of the best cities to invest in real estate this year. 

If you travel to Austin, incur $2,000 in travel expenses, and eventually buy your first rental property in the market, those travel expenses are not immediately deductible. Instead, they must be capitalized by adding them to your property basis and depreciated over 27.5 years rather than being expensed the year they are incurred. 

Now, assume your first rental property in Austin performs beyond your wildest expectations and you want to buy another. This time your travel expenses can be fully deducted (instead of capitalized) because you already own a property in the market, assuming the travel expenses are ordinary and necessary for your rental property business in the market.

So what happens if you travel to a different city to research potential rental properties, but decide not to invest? 

In a situation like this, the travel costs are considered a business start-up expense and can only be deducted after you buy your first rental property in that market. If you’re a remote real estate investor, it may be a good idea to research as much as possible online. Then, wait to travel to the market once you have a property under contract and the home has passed its preliminary inspections.  

How Auto Deductions Work

Real estate investors who own rental property in their home market can claim the auto expense deduction provided by the IRS. 

As a side note, your home market – also known as your “tax home” – is your regular place of business. For most real estate investors, the home market is also the city that they live in. Even if you own rental property remotely, or in an area of the country outside of your home market, you still do the majority of your work on your rental property business from your home office.

There are two ways rental property owners can claim an auto expense deduction:

Standard Mileage Deduction

The standard mileage deduction is the easiest way to claim an auto deduction when traveling to a rental property in your own market. To calculate the mileage deduction, simply keep track of your miles driven for your rental property business and multiply by the standard mileage rate. 

The standard mileage rate issued by the IRS for 2021 for a car, van, pickup, or panel truck is 56 cents per mile. For example, if you drove a total of 500 miles this month for rental property-related purposes, the standard mileage deduction would be $280 (500 miles x 56 cents).

Actual Expense Deduction

The second way that rental property investors can claim an auto expense is by keeping track of all auto expenses and business-related miles, then claiming proportional share used for business as the actual auto expense deduction.

For example, assume your auto expenses – items such as car payments, gas and oil, insurance, repairs and maintenance, car washes, registration and license fees, and tolls and parking costs – were $975 this month. If you drove a total of 2,100 miles and 500 of those miles were related to your rental property business, your actual auto expense deduction would be $232:

• $975 total auto expenses / 2,100 total miles driven = 46.4 cents per mile
• 500 miles related to rental property business x 46.4 cents = $232

Keeping Track of Your Miles

Both the standard mileage deduction method and the actual expense deduction method require you to keep track of the miles driven for your rental property business:

• Odometer reading at the beginning of the period (usually the month or year).
• Odometer reading at the end of the period.
• For each business trip, the date and purpose of each trip, the number of miles driven, and the location of the tip.

How to Track Rental Property Travel Expenses

You can keep track of your mileage using a logbook or digitally. Smartphone apps for tracking mileage include MileIQ , SherpaShare , and TripLog .

If you’re using the actual expense deduction you’ll also need to keep track of your auto expenses. 

One of the easiest ways to do this is with Stessa’s mobile app . Each time you incur an auto expense, scan the receipt or invoice. Stessa’s machine learning and OCR technologies will parse all of the details and automatically organize the information for you.

Mixing Business with Pleasure

Sometimes it’s possible to mix personal and business travel provided that you do it strategically. Generally speaking, as long as at least 50% of your travel days were spent on your rental property business, your trip may still be tax-deductible

Of course, any lodging and meal expenses incurred on non-business days are not tax-deductible as a travel expense, nor are the travel expenses for a spouse, partner, or child unless they accompanied you on the trip for a legitimate business purpose.

Final Thoughts on Deducting Travel Expenses

There are a variety of reasons people invest in real estate – recurring rental income, appreciation in property value over the long term – and of course, rental property travel expenses. 

Whether you’re traveling outside of your home market as a remote real estate investor or going to rental property you own in-town, travel expenses are typically deductible as long as they’re ordinary and necessary for your rental property business.

Jeff has over 25 years of experience in all segments of the real estate industry including investing, brokerage, residential, commercial, and property management. While his real estate business runs on autopilot, he writes articles to help other investors grow and manage their real estate portfolios.

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Tracking Travel and Mileage Deductions for Rental Properties

Travel and mileage make up a significant tax deduction for landlords. Keep detailed records using software like Landlord Studio.

PUBLISHED ON

Updated for the 2023 tax year

Travel and mileage form a significant tax deduction for landlords. Unless you live next door to your property you are going to spend time and money traveling to and from, whether this is traveling to pick up supplies, managing viewings, or doing property inspections. Instead of paying for the associated costs out of pocket, these travel expenses can be deducted against taxable income at the end of the tax year.

This will allow you to reduce your taxable income and maximize profits. To ensure you remain tax compliant, you need to know what travel expenses are deductible and how to calculate your mileage tax deduction.

About the travel and mileage tax deduction

For landlords, mileage, as well as other car-related and travel expenses, are deductible in the year incurred.

This means that come tax season, you can claim your expenses for gas, car maintenance, and more against your taxes. The IRS has set guidelines as to what constitutes a deductible travel expense, and these should be followed to avoid being penalized.

However, it’s important to note that if you do intend to claim your mileage allowance you will need to keep a detailed and accurate mileage log. The easiest way to keep a mileage log for taxes is with specifically designed software. Thankfully, if you’re using Landlord Studio you can easily log the distance, purpose and details of all of your travel and easily run a mileage report at the end of the tax year.

The Travel Expenses Must Be “Ordinary And Necessary”

In order for your travel expenses to be deemed legitimate, they need to be both ordinary and necessary.

For landlords, this might look like traveling to one of your rental properties to perform a routine inspection or traveling to meet accountants. It would not include, taking a longer route to work every day so you can drive past your rental properties or meeting another landlord friend for coffee.

Mileage expense examples that can be claimed for rental business purposes include:

• Traveling to your property to deal with tenants, maintenance, repairs
• Traveling to your property to show prospective tenants
• Traveling to collect supplies, such as building supplies for maintenance or renovations
• Traveling to meet with contractors, attorneys, accountants, etc.
• Traveling to landlord-specific classes or trade shows

Non-business related travel that cannot be claimed includes:

• Traveling to and from your house and your workplace (every day commuting)
• Making a detour to the grocery store on the way home from visiting your rental

Although what constitutes a travel expense can sometimes be ambiguous, it’s best to abide by the guidelines to avoid being penalized by the IRS . If you’re audited by the IRS and they determine that you have claimed unnecessary expenses (extra miles, for example), you could face penalties for overstating deductions, such as fines or even federal prison time. Negligence and not keeping relevant records can also lead to penalties.

What Are The 2021/2022 Mileage Tax Deduction Rates?

The easiest way to calculate mileage tax deductions is by using the standard mileage rate set by the IRS.

• For the 2021 tax year, the rate was 56 cents per mile
• For the first 6 months of the 2022 tax year, it’s 58.5 cents per mile .
• In recognition of significant gasoline price increases during 2022, the IRD adjusted the rate for the last 6 months of the 2022 tax year to 62.5 cents per mile.

What Is The 2023 Mileage Tax Deduction Rate?

The IRS increased the standard mileage rate for tax purposes by 3c per mile for the 2023 tax year.

‍ For the 2023 tax year, the standard mileage rate is 65.5 cents per mile.

These rates apply to electric and hybrid-electric automobiles, as well as gasoline and diesel-powered vehicles.

Using The Standard Mileage Rate To Calculate Your Deduction

To calculate your deduction, simply multiply your business miles by the standard mileage rate. For example, if you drove 10,000 business miles in 2023, you would multiply this by 0.0655 to give you a mileage tax deduction of $655.

In order to claim this deduction, you need to keep an exact record of the miles traveled, the dates and time of the travel, and the purpose of the travel. The easiest way to do this is to use an automated mileage tracker like the one built into the Landlord Studio app.

Other vehicle expenses you can claim in addition to mileage include business-related parking fees and tolls, interest on a car loan, and registration or license fees. You must use the standard mileage rate in the first year you use a car for your rental activity to be qualified to use this rate going forward. The bottom line is that unless your vehicle has high operating costs, the standard mileage rate should give you a significant deduction.

Claiming Actual Expenses Instead Of The Mileage Deduction

Another way to claim a mileage tax deduction is to deduct your actual expenses. This is a little more complex than using the standard mileage rate as you also have to track how much you spend on gas, oil, repairs, tires, insurance, and other car operating costs. Vehicle depreciation is also included here.

The downside of using this method to claim expenses is that it requires more record-keeping, so may not be worth it if you don’t drive much for work purposes. If done properly and/or your car has higher than normal operating costs, it can lead to healthy tax savings.

An easy way to help you track actual expenses is to use an income and expense tracking software (like Landlord Studio) which will allow you to record and categorize your travel expenses as they happen so you don’t miss any, and easily digitize receipts and recording the purpose of the travel in the notes section.

Whether you claim actual expenses or the standard mileage rate, the IRS stipulates that you must complete part V of Form 4562 and attach it to your tax return.

Other Travel Expense Deductions

Depending on how geographically widespread your rental property portfolio is, or if you’ve invested in out-of-state property , you may not always be able to travel for work by car. If this is the case, and you have to leave your city or state in which your business or work is located in order to manage your rental properties, you can deduct other expenses such as:

• Transportation : fares for airplanes, trains, buses, or if you rent a car .
• Meal and beverage: 50% of food and drink expenses.
• Lodging : 100% lodging expenses (hotel, motel, etc.) for days you work at your rental.

The Primary Purpose Of The Trip Must Be Work

For an overnight trip to be deducted, the primary purpose of the trip must be work. Although this sounds obvious, the IRS pays close attention to overnight business trips, so operating within the guidelines is a must.

Travel within the United States is subject to a hard-line rule whereby you can deduct 100% of your expenses for a business trip, but only if you spend more than half of your time on rental activities.

For example, if you go away for 6 days and work for 4 of those days and relax for 2 days, that can be expensed as a business trip. If, however, you’re only planning to work for 1 day but decided to extend the trip by 5 days to have a personal vacation while you’re already away, this cannot be counted as a work-related trip.

What To Include In Your Mileage Log For Taxes

Maintain a driving log (if claiming the standard deduction).

You must keep a log of the total miles driven if you choose to take the standard mileage deduction. The IRS specifically requires that you record the following:

• the odometer reading at the beginning and end of the trip
• the purpose of the travel,
• the start and end locations,
• and date of the trip.

The IRS does not care for ballpark figures, which means your mileage log must be maintained on a regular and consistent basis.

Tip: You can use the Landlord Studio's in-built GPS mileage tracker to easily keep an accurate and up to date mileage log.

Keep a Record of Receipts (If claiming the actual expense)

If you choose the actual expense deduction, you don’t need to maintain or record your mileage . Instead, keep copies of relevant receipts and documentation.

Each document must include:

• dollar amount of the service or service purchased,
• and description of the product or service needed.

The travel expense must be incurred within the tax year for which you’re making the claim.

How To Track Your Rental Mileage Tax Deduction

Your accounting software should have a built-in mileage tracking tool. Landlord Studio for exmple, has an automatic GPS mileage tracker that will save you time and simplify the process of tracking your travel and mileage expenses. Claim the maximum allowable deduction at tax time.

What’s more is that at the end of the tax year, you can instantly generate a mileage report to calculate your overall deduction for the year. This report can be generated on any device whenever you need it and all data is securely stored in the cloud for posterity.

If you choose to track your actual expenses or have other travel expenses such as airfares Landlord Studio can be used to easily record and categorize these and reports run at the end of the year.

All reports can be downloaded or shared directly from the software with your accountant or business partners.

Tracking your mileage tax deduction for rental property accurately is key to maximizing your tax deductions and avoiding being penalized by the IRS.

Landlord Studio has an in built GPS mileage tracker that makes it easier to stay compliant by allowing you to track your travel expenses and then create relevant reports at the tap of a button.

About Landlord Studio

Landlord Studio is an easy property management and accounting software and app designed for landlords. Track income and expenses, run reports, collect rent online, find and screen tenants, manage property maintenance, and more.

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14 Most Common Rental Property Tax Deductions for Landlords

Last Updated: April 19, 2024 by Cameron Smith

Learn about the most common rental property tax deductions, as well as some costs that owners aren’t legally allowed deduct.

What Are Rental Property Tax Deductions?

One significant advantage of owning a rental property is the plethora of tax deductions available. These deductions allow you to reduce your taxable income, resulting in lower tax payments. The potential savings can be substantial, potentially amounting to thousands of dollars per year.

While business owners can always deduct expenses from their income, rental property owners are allowed a broader range of deductions. These tax deductions have to be relevant to your business. They should be costs that are generally expected when running a rental property business.

Fixing a broken dishwasher is a relevant expense, but stopping at a gas station to buy a snack on your drive to the property isn’t.

14 Common Rental Property Tax Deductions

Rental property owners can generally claim these deductions:

• Property Depreciation
• Mortgage Interest
• Property Taxes
• Maintenance and Repairs
• Travel and Transportation Expenses
• Insurance Premiums
• Office Space
• Advertising and Marketing Costs
• Landscaping
• Employees and Contractors
• Property Upgrades

1. Property Depreciation

You are allowed to depreciate the value of the property over time. According to tax law, your property has a useful life of 27.5 years .

This means that if your property (not the land, just the building) is worth approximately $275,000, you can deduct $10,000 per year! That’s an   incredible   tax savings bonus.

This deduction often seems strange to new property owners because property values increase over time! However, as properties get older, they fall into disrepair. Foundations crack, roofs break, and fences crumble. If you look at it from that perspective, then it makes a bit more sense that you can write it off as a business expense.

2. Mortgage Interest

Mortgage interest is another sizeable tax deduction, especially in the early years of your rental property.

In the early days of your mortgage, interest can make up   80% of your payment ! Of course, that varies based on interest rates and down payment.

So, imagine that your mortgage payment is $2,000 per month in year one of your mortgage. At the end of the year, you could be paying $19,000 in mortgage interest.

You can often write off a good chunk of your rental income between mortgage interest and property depreciation.

3. Property Taxes

Your property taxes are also considered a business expense that comes with owning a rental property.

Each state sets its own property tax, so the amount will vary for you. Hawaii has the   lowest property tax   at just 0.32% while New Jersey charges 2.23%.

If you’re in New Jersey and your property is valued at $400,000, you’ll pay a hefty $9,200 in property taxes. At least it’s all tax deductible!

4. Maintenance and Repairs

One of the most common tax deductions rental property owners take is for the maintenance and repairs of the property. If there’s a leaky pipe and you call in a handyman to fix it, those costs are tax deductible because it’s an expense directly related to your business. Don’t forget that you can deduct the costs of tools, cleaning supplies, and other items you purchase for ongoing maintenance.

5. Appliances

Purchasing new appliances is a bit trickier, as they often must be depreciated over a 5-year period. In other words, if you pay $2,000 for a fridge, you can write off $400 per year. The   IRS allows the following appliance purchases   to be depreciated:

• Washers and dryers
• Refrigerators
• Dishwashers

There are a few different ways to do the accounting on these (such as straight-line, bonus, and accelerated depreciation), so you’ll likely want to talk to an accountant and settle on how you want to handle the tax deductions here.

6. Travel and Transportation Expenses

If you’re traveling for business, you can deduct your costs! The IRS establishes that you can   deduct 67 cents per mile   or your actual costs.

Traveling from your house to your property is considered a commute and isn’t tax deductible. However, if you travel from your office to a property, or from one property to another, you can deduct those miles.

7. Utilities

Any utilities that you pay are tax deductible. Many property owners who make the tenants pay often have to charge less rent anyway. It might make sense to keep rent a bit higher and pay utilities yourself since you can write it off.

8. Insurance Premiums

Your mortgage lender likely requires that you pay monthly insurance premiums along with your mortgage. This cost is tax deductible, as well as other types of insurance like landlord or liability insurance.

If you have employees, any contribution to their health insurance and premiums you pay for workers’ compensation insurance is tax deductible as well.

9. Office Space

If you rent out an office to run your rental property business, you can deduct that cost and everything associated with it (e.g., internet, heating, A/C).

If you work from home, the costs become much harder to estimate. You are allowed to deduct costs associated with your business, but it’s usually taken as a percentage of your home.

For example, let’s say you have a home office that’s 150 square feet. Your entire house is 3,000 square feet. This means that you can write off about 5% of certain overall costs of your home as a business expense, such as your internet bill.

Similarly, if you buy a laptop but use it 50% for business and 50% for personal use, you can deduct half the cost.

10. Advertising and Marketing Costs

Anything you spend to attract tenants to your properties is considered a normal expense for a rental property owner. This could include printing signs, running ads, or paying for listings.

This can also include referrals you pay out for someone helping you find a tenant.

11. Landscaping

Similar to repairs and maintenance, keeping the property looking nice is essential to your business, meaning you can deduct the cost! This could involve hiring people to handle it or including the cost of a lawnmower, shears, herbicide, and other items.

12. Employees and Contractors

A few have already been mentioned, but anyone you pay is a deductible expense. This could include:

• Property Manager (either a 3rd party company or an individual you hire yourself)
• Cleaning crew
• Labor for renovations

13. Property Upgrades

Any additions or improvements you make to the property are usually tax deductible. This could include adding a bedroom, bathroom, deck, porch, or more. Because these are big costs, they usually must be depreciated over time.

14. Software

The cost of any software you use to run your business is tax deductible. For example, you might purchase QuickBooks to handle your accounting or an online portal for collecting and tracking rent payments.

Which Rental Expenses Are Not Tax Deductible?

Not every cost a rental property owner incurs can be a tax deduction.

Unpaid Rent

Unpaid rent is   not   tax deductible because it’s not considered an expense. Rent is considered part of your income, and having a lower-than-expected income does not result in a tax deduction for you.

Like unpaid rent, you can’t deduct the cost of paying the mortgage yourself while the property is vacant. You have to pay your mortgage whether your tenant pays or not, and mortgage payments are not tax deductible. Not collecting rent means you have a lower income, which doesn’t count as an expense.

Any fines or penalties you incur cannot be tax deductible. Some of these could result from noncompliance with a city ordinance, breaking HOA rules, or breaking a law. A tax deduction would benefit you, which isn’t the intent behind a fine or penalty.

Personal Expenses

It’s easy to blur the lines between a business and a personal expense. The easiest way to think about it is if you had to defend your choice to the IRS, do you think they’d be okay with it? Is this expense actually necessary to running your business?

If it’s a big expense, it’s certainly worth discussing with a CPA. However, in many cases, the answer (if you’re not sure) is likely that it’s a personal expense.

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Rental Property Tax Deductions

What rental property tax deductions can clients buying commercial or rental real estate take here's an overview of the main rental and investment property deductions..

Whether you’re currently representing a real estate investor or believe that you will do so in the future, there are  numerous tax deductions  that people who purchase and operate rental properties can claim. These deductions are somewhat different from deductions for a primary residence lived in by the owner. As a REALTOR®, your clients will likely ask you fundamental questions about the tax ramifications of owning rental real property. While no one should reasonably expect you to be a tax expert, it is important that you can answer basic questions that your clients might ask. This article examines rental property tax deductions and their meaning for your clients.

Common Rental Property Tax Deductions | Commercial and Investment Real Estate |  Which Rental Property Expenses Are Not Tax-Deductible? | Talking to Clients About Rental Property Tax Deductions

Common Rental Property Tax Deductions

The following deductions, which are the ones most commonly claimed by rental property owners, can substantially reduce the cost of purchasing, owning, and maintaining rental property. Understanding the basics of these deductions will allow you to help the client contextualize the purchase price by considering his or her projected net income based on available rental property tax deductions.

Asset Depreciation

Of the many tax benefits of rental property, depreciation might seem somewhat counterintuitive since property values typically increase over time. Yet, in the eyes of the tax law, the depreciable life of real estate generally ranges from 27.5 years for residential property to 39 years for non-residential real estate.

Depreciation is a tax allowance covering the expected wear and tear and obsolescence of the property that will invariably occur over time. Owners can also depreciate certain larger expenditures for personal property over time, such as appliances or furniture.

Mortgage Interest

Of all the investment property tax deductions that your clients may be able to claim, you should be most familiar with the mortgage interest deduction .  This deduction not only applies to primary and secondary residences, but also to all kinds of rental real property that have a mortgage.   However, for owners who live in a residence with a mortgage, the interest is an itemized deduction (reported on Schedule A) and the interest deduction is generally limited to mortgage debt of $750,000.  

Owners of rental properties, on the other hand, will report any mortgage interest paid as an expense on Schedule E of Form 1040 or on a partnership or corporate tax form. And unlike those who itemize mortgage interest deductions, rental property owners are not subject to a limit on the amount of the debt.

Property Taxes

Another tax deduction available to most rental property investors is that for  property taxes . This deduction is also available for owner-occupants of primary and secondary residences, but only if they itemize their deductions.   

The Tax Cuts and Jobs Act of 2017 temporarily capped the deduction for state and local taxes (SALT) at $10,000 or $5,000 for married people who file separately.

Simply stated, a repair involves fixing or replacing something that’s broken or inoperable. If your client needs to fix a broken banister or replace a damaged garage door on a rental property, the expenditures will constitute repairs and they can generally deduct the cost on their tax return. Upgrades or improvements to a rental property generally are not deductible as repairs, but the cost is depreciable over the useful life of the property. Examples of improvements include adding a new shed or remodelling a bathroom.

If your client provides a tenant with a rental credit in exchange for performing a repair, this credit can also be deducted. Let’s say that your client offers a tenant a credit of $500 off their following monthly rent for repairing a door and installing a new shower rod. Even though this $500 will be considered income, it can also be deducted as a repair expense.

Operating expenses

If your client chooses to use the expertise of a property management company to look after their rentals, the associated expenses are generally tax-deductible. Yet if your client also plans to be the property manager, they’ll face operating expenses that arise from handling the tenant relationship and keeping the property in working order.

Any tenant screening costs can be deducted, including background, credit, or reference checks. Other necessary expenses of maintaining the property or landlord-paid utilities are also typically deductible. These may include:

• Appliance care and maintenance
• Carpet cleaning
• Pest control
• Seasonal property maintenance (gutter cleanings, tree pruning, snow removal, etc.)

Travel and Other Miscellaneous Expenses

Many travel expenses  that your client has in connection with his or her rental property may be deductible. If they need to travel to collect rental income or to manage, conserve, or maintain their property, associated expenses are generally tax-deductible. To claim this deduction, you’ll want to advise clients to keep extensive records, ensuring they keep receipts and count mileage from their travels.

According to the tax law, only travel expenses that are ordinary and necessary can be deducted, which means that costs can’t be lavish or extravagant.  Nor can they be related to personal travel. Examples of deductible travel expenses include:

• Airfare, train costs, car, or other transportation costs related to the trip
• Taxi or ridesharing fares when traveling from a hotel to the rental property
• Using a vehicle while at the rental property 
• Lodging expenses
• Laundry and dry cleaning
• Property-related telephone calls
• Service tips

Expenses related to traveling to make improvements or renovations to a rental property aren’t tax-deductible as these costs are recoverable through depreciation. However, your client may be able to deduct other standard expenses like printing, office supplies, advertising costs, and insurance costs.

Commercial and Investment Real Estate

Commercial real estate can involve all kinds of rental property from hotels and office buildings to shopping centers and multi-family apartment buildings or even bakeries and restaurants. Commercial real estate that can be rented doesn’t only involve apartments or Airbnbs.

Once your client has made their investment, they can earn rental income from the payments they receive from any tenant that has rented the property.

 Before advising a client who plans to offer short-term rentals, make sure that you familiarize yourself with any  short-term rental restrictions  in your area. These restrictions may limit the ability that property owners have to rent out a property on a short-term basis.

Which Rental Property Expenses Are Not Tax-Deductible?

Certain rental property expenses are not tax-deductible, including:

• Lost rent that came about because it wasn’t paid or collected or because the property was vacant.  However, if your client is on the accrual basis of accounting, and they included the rent in their income, it may be deductible.
• Personal expenses, such as the cost of commuting to and from work.
• Entertainment expenses.
• Political contributions.
• Fines and penalties.

You should always consult a tax professional about the specifics of tax deductions before you advise a client about claiming any rental property tax deductions.

Talking to Clients About Rental Property Tax Deductions

When speaking with your clients about rental property tax deductions, there are a few key areas you’ll need to cover.

The goal of most real estate investors is to make money, so guiding clients to a property that makes sense for them is your primary role as a REALTOR®. And keep in mind that it’s always best to refer your clients to a tax professional to confirm how a rental property and eligible deductions will impact their financial situation.

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Tracking Travel and Mileage Expenses for Rental Property Tax Deductions

Taking advantage of tax deductions is essential to optimize your financial benefits and maximize your return on investment. One crucial aspect of tax deductions for rental properties is tracking travel and mileage expenses. 

Let us explore the laws and regulations surrounding travel deductions. You can effectively track your mileage and calculate these deductions to help minimize your tax liability while maintaining accurate records.

Understanding Travel and Mileage Deductions for Rental Properties

The Internal Revenue Service (IRS) allows landlords to deduct certain expenses related to travel and mileage when managing their rental properties. However, it’s important to distinguish between personal and business-related travel. Expenses specifically incurred to manage, maintain, and conduct business activities related to your rental property are eligible for tax deductions. However, personal travel expenses are not.

To claim travel and mileage deductions, your rental property must meet the criteria set by the IRS as an investment property used for profit. It should be clear that the expenses being claimed are directly associated with the rental business; not for personal use.

How to Track Your Mileage

Maintaining accurate records of your mileage is crucial to support your tax deductions. Here are some ways to effectively track your mileage:

• Mileage Log:  Keep a dedicated mileage log or use a mobile app that allows you to record the date, starting location, destination, purpose of the trip, and the number of miles traveled for each business-related journey.
• GPS Tracking:  Utilize GPS tracking apps or devices to automatically record your travel routes and distances. These tools can simplify the process of tracking your mileage and ensure accuracy.
• Document Business Purposes:  Clearly document the business purpose of each trip. For rental property owners, business purposes may include visiting the property for inspections, repairs, rent collection, and meetings with tenants or contractors.

Calculating Mileage Deductions

There are two methods to calculate mileage deductions: the Standard Mileage Rate method and the Actual Expense method. 

The Standard Mileage Rate Method

The Standard Mileage Rate method allows you to deduct a fixed amount per mile. The amount is determined by the IRS each year. For the tax year 2023, the standard mileage rate is 65.5 cents per mile for business-related travel. 

Simply multiply your business miles by the usual mileage rate to determine your deduction. For instance, if you traveled 5,000 business miles in 2023, multiplying that number by 0.655 would result in a $3,275 mileage tax deduction.

Along with cars powered by gasoline and diesel, these prices also apply to hybrid and electric vehicles. 

Business-related parking costs and tolls, interest on a car loan, and registration or license fees are some other vehicle expenses you can deduct in addition to mileage. To be eligible to use the regular mileage rate moving forward, you must use a car for your rental activity during the first year. The usual mileage rate should provide you with sizable savings unless your car has high operational costs.

The Actual Expense Method

Alternatively, the Actual Expense method involves calculating the actual costs associated with your rental property’s business-related travel. This includes expenses such as gas, oil, maintenance, insurance, and depreciation of the vehicle. Keep in mind that once you choose a method, you must stick with it for the entire tax year.

As you must additionally keep track of your spending on gas, oil, maintenance, tires, insurance, and other car operational expenses, this is a little more complicated than utilizing the standard mileage rate method.

This technique of deducting expenses has the drawback of requiring extra record-keeping, so it might not be worthwhile if you don’t drive much for work-related purposes. However, it can result in significant tax savings if done correctly, and/or if your car has greater operating costs than average.

Other Deductible Travel Expenses

In addition to mileage deductions, there are other travel-related expenses that you may be eligible to deduct. These include:

• Airfare and Transportation:  If you need to travel by air or other modes of transportation to visit your rental property or conduct business related to it, these expenses can be deducted.
• Accommodation:  If you incur overnight accommodation expenses while conducting rental property business away from your tax home, such as attending a conference or inspecting properties in another city, these expenses are deductible.
• Meals:  The cost of meals during business-related travel may be partially deductible. Generally, you can deduct 50% of the actual meal expenses incurred while on rental property business.

Staying Compliant with Tax Laws

To stay compliant with tax laws, it’s crucial to maintain detailed and accurate records of all your travel-related expenses. Keep receipts, invoices, and any supporting documentation to substantiate your deductions in case of an IRS audit. Organize your records throughout the year to make tax preparation more manageable.

Tracking travel and mileage deductions for rental properties is a crucial aspect of optimizing your tax benefits as a landlord. By understanding the laws surrounding these deductions, implementing effective tracking methods, and staying organized with your records, you can confidently claim legitimate deductions and minimize your tax liability. 

Now that you can save up on tax deductions, you can allocate your budget to other income-generating aspects of your rental property. Like in marketing your property, for instance. Use platforms like Padleads to publish your listing. Syndicate the listing to popular websites so that more potential renters can see it. Doing so would help you fill a vacancy in a shorter amount of time.

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National Tax Reports 2023 – 2024

What rental property expenses are tax deductible.

Owning a rental property can be a lucrative investment, but it also comes with various expenses.

The good news is that many of these expenses are tax-deductible, helping landlords reduce their taxable income and maximize returns.

In this article, we'll explore the rental property expenses that are tax-deductible, empowering landlords to make informed financial decisions and optimize their rental property investments.

Table of Contents

Understanding Tax-Deductible Rental Property Expenses

Tax-deductible rental property expenses are costs associated with owning, operating, and maintaining rental properties that can be subtracted from rental income to determine taxable income.

Claiming these expenses can significantly reduce the tax burden on landlords and increase the profitability of rental properties.

Mortgage Interest

One of the most significant tax-deductible expenses for rental property owners is mortgage interest.

Landlords can deduct the interest paid on mortgage loans used to finance the purchase or improvement of rental properties.

This deduction applies to both primary mortgages and secondary loans, such as home equity lines of credit (HELOCs) or second mortgages.

Property Taxes

Property taxes paid on rental properties are also tax-deductible. Landlords can deduct the full amount of property taxes paid during the tax year, helping offset the ongoing costs of property ownership.

Operating Expenses

Various operating expenses associated with managing rental properties are tax-deductible, including:

• Property management fees
• Repairs and maintenance
• Utilities (if paid by the landlord)
• Insurance premiums (e.g., property insurance, liability insurance)
• Homeowners association (HOA) fees
• Pest control services
• Lawn care and landscaping

Depreciation

Landlords can also deduct depreciation expenses for rental properties over time. Depreciation allows landlords to recover the cost of the property over its useful life through annual deductions.

While land itself cannot be depreciated, the building and certain improvements on the property can be depreciated over a set period, typically 27.5 years for residential rental properties.

Travel and Transportation Expenses

Landlords may deduct travel and transportation expenses incurred for rental property-related activities, such as:

• Traveling to and from the rental property for maintenance or repairs
• Visiting tenants for lease signings or property inspections
• Attending landlord-tenant meetings or seminars

Professional Services

Fees paid for professional services related to rental properties are tax-deductible. This includes expenses such as:

• Legal fees for drafting leases or resolving tenant disputes
• Accounting and bookkeeping services
• Tax preparation fees
• Consultation fees for real estate professionals or financial advisors

Home Office Expenses

If landlords use a home office for rental property management activities, they may deduct a portion of their home-related expenses, such as utilities, internet, and home maintenance.

The deduction is based on the percentage of the home used exclusively for rental property management.

Landlords Can Optimize Their Tax Deductions

Tax-deductible rental property expenses can significantly benefit landlords by reducing taxable income and increasing overall profitability.

By understanding which expenses are eligible for deduction and keeping detailed records, landlords can optimize their tax deductions and maximize returns on their rental property investments.

Consulting with tax professionals or certified public accountants (CPAs) can provide further guidance on maximizing tax deductions and ensuring compliance with IRS regulations.

Related Posts

How To Calculate Travel Expenses For Rental Property

• Landlord Tips

by Stephen Michael White

March 7, 2023

There are a lot of numbers to keep track of in the rental industry. From vacancy rates to rent averages, numbers are a constant source of information and wealth generation. But there’s one number that some landlords forget to keep their eyes on: mileage for rental property management.

Tracking travel expenses for rental property management, such as mileage, is key in ensuring the best profit margin each year. Landlords with a strong handle on tax deductions and how to properly apply them to their business documentation each year utilize mileage in those calculations.

Do you know how to calculate travel expenses for rental property, or are you missing out on this key deduction? Maximizing profits is possible by reducing taxable income with deductions.

Today, learn how to track travel expenses, including mileage, to ensure you remain tax compliant while maximizing your profits.

A Table Of Contents On Mileage For Rental Property

Deducting mileage for rental property management isn’t always a straightforward process. Everything from inspections to property viewings may be included, and there are multiple ways to include mileage in your deduction calculations. Get started with this guide:

IRS Guidelines On Landlord Mileage

Mileage for rental property vs. actual expenses, #1: create a log to track mileage and expenses, #2: make sure you don’t miss any common expenses, #3: review updated irs guidelines each year, #4: file taxes carefully, taking care of your business, can landlords deduct travel expenses, what are the main things to remember about deducting travel expenses, what should be included in travel expenses for landlords, can i deduct mileage traveling to and from my rental properties, can i deduct travel while investigating a new rental market, don’t forget about deducting mileage for rental property, all about mileage for rental property management.

Mileage is a deductible expense for landlords. The cost of gas and the wear-and-tear on your vehicle while traveling to and from rentals for work is a true expense for your business, so it’s essential to know how to include this expense in your annual tax return.

To claim mileage as part of your standard deduction, you must keep a detailed mileage log. This document should track your travel to and from business activities and can be used to verify your tax return.

Travel-related deductions landlords can use extend beyond just mileage. Toll road, parking, and license fees may all be deductible depending on your situation.

The IRS requires that all deducted travel and transportation expenses related to rental property must be ordinary and necessary costs for your business to operate. Otherwise, they are not legitimate. For example, meeting a local contractor about a rental repair is deductible; meeting a friend, who happens to be a landlord, for dinner is not.

More examples of valid expenses that may apply to your rental business include the following:

• Traveling for property showings
• Traveling to complete maintenance or repairs
• Traveling to meet with contractors, real estate agents, etc.
• Traveling to business-related classes

Conversely, any travel tied to your daily life or commute is not a deductible expense. These fall outside the “necessary and ordinary” expense rule the IRS follows.

For example, a detour on your way home from a rental to pick up dinner and groceries would not be a deductible travel expense. The purpose of that leg of the trip is not business related. While you could still deduct your travel to the rental property, the journey home should be excluded from your calculations.

It’s imperative to be careful about what you include in your expenses. The IRS implements hefty fines on your tax return if you are found to be deducting illegitimate business expenses.

Most landlords utilize the standard deduction on their business expenses . This means you will use the standard mileage rate for expenses when entering your mileage. Many find this method to be the most straightforward and effective.

It’s also possible to deduct your actual expenses rather than the standard deductible when filing your taxes. This is more complex as you will need to track more details, including:

• Car-operating costs
• Vehicle depreciation

For some, this method enables larger savings. This is typically the case when your business vehicle has very high operating costs.

Sticking to the standard deduction is usually the way to go for most landlords, especially those working in their home markets. Most accountants and tax software solutions will compare which filing method makes the most sense for your situation, so don’t get too stressed about this. The key is understanding that you have options.

Understanding why travel expenses are important for tax filing purposes isn’t enough. It’s time to learn how to calculate travel expenses for rental property. Put tracking into action to ensure your mileage for rental property management isn’t missed in your deductions.

The first thing you need to do is ensure that you have a clear tracking system for both mileage and expenses.

You’ll need to keep a mileage log if you plan to claim mileage based on a standard deduction. The IRS specifically requires the following information to be recorded in your driving log:

• Odometer at the beginning and end of every trip
• Purpose of travel
• Where the trip starts and ends
• Date of the trip

Your mileage records need to be precise. Guesswork shouldn’t be included. If you aren’t sure, check the details or leave it out. Otherwise, you could deal with a sticky review by the IRS.

Some people prefer to use a mileage-tracking app rather than creating a physical log. Either method can work. Try out a mileage app if you enjoy tracking your calendar and other essentials on your phone. Otherwise, keeping a notebook in your vehicle makes recordkeeping simple.

You’ll also want to track all expenses. Create a record of receipts to do so. This is especially important if you claim actual expenses rather than the standard deduction. If so, keep records of receipts and documents for all travel, travel-related services, and fees. Be sure to have the cost and description of the service on record along with the date.

The most common expenses claimed by landlords and real estate investors include the following:

• Travel to and from the airport
• Transportation fare (airfare, bus fare, train ticket)
• Travel to and from hardware or supply shop for business-related supplies
• Travel to and from meetings with team members
• Travel to and from knowledge seminars and continued learning sessions
• Shipping cost for luggage
• Lodging when traveling for work
• 50% of meal expenses while outside of your area for work
• Other miscellaneous fees incurred due to work (computer rental fees, internet fees, etc.)

As you work through your expenses and deductions, be sure that any relevant items from this list are included in your logs and documentation.

Even if you’ve been filing your taxes as a landlord for years, there is always a chance that some provisions will change. Working with a qualified accountant can help ensure you don’t misunderstand any of these changes, but you should also research to have an excellent foundation to work with.

Landlord tax deductions can be reviewed online. You can also see yearly updated mileage rates, as these change regularly to reflect the current economy. Keep up to date with the guidelines to ensure there aren’t any unexpected costs or changes.

Finally, make sure you take your time calculating deductions and expenses, and working through your overall tax return. There is a lot of information that you’re dealing with and it can get confusing. Break down the overall return into relevant sections and work on them one at a time. This will keep you on track and make sure everything is clear.

It’s always recommended that you work with a qualified professional to file or review your tax return before it’s submitted to the IRS.

We know your business is critical to you. As a landlord, you wear many hats and must keep up with a lot of information to stay current and thrive in this field. That can be exhausting, and that’s why we want to help.

At RentPrep, we prioritize creating tools to help landlords like you succeed. In addition to our tenant screening services, we also put energy into developing our newsletters and blog posts as valuable resources. Sign up for our latest updates today , and stay in the loop with the latest and greatest in the rental market.

Travel Expenses For Rental Property FAQs

Understanding what does and does not qualify as an expense is just one of the obstacles landlords face as they work through tax deductions. Here are the answers to the most commonly asked questions as landlords handle mileage, expenses, and taxes:

Landlords can deduct travel expenses if the travel is explicitly done to visit a rental property and is necessary for business. Travel expenses often include gas, lodging, and meals. It’s vital that you do not overuse these expenses or try to push the boundary of what’s actually necessary for business.

Travel expenses are an overused expense category of the IRS, so this section may be scrutinized if your return is under review. As such, ensure that your travel expenses are thoroughly documented so you can show your case if necessary.

Consulting a qualified CPA whenever you have questions about travel expense deductions is always the best move. However, there may be times when you’re trying to determine if something will or will not be a travel expense when you cannot consult an accountant.

In these times, consider the following:

• The trip must have a clear business purpose
• Most of the time on your trip must be spent on business, not leisure
• Accommodations, meals, and other expenses must be “ordinary” for your business rather than splurges on unnecessary and extravagant expenses
• Traveling for standard maintenance and repairs to a rental property is tax deductible; traveling for capital improvements is not
• Showing or inspecting a rental property is a valid reason to travel for business

These are just some of the most common areas that confuse landlords as they work on travel expense deductions. If you’re still trying to decide about a particular trip or expense, research the issue on the IRS page devoted to this topic or contact a qualified professional for assistance.

When it comes to tax deductions, you want to ensure you aren’t missing anything. Travel expenses represent unfamiliar territory for many landlords. Before you file your taxes, review this list of the most common travel expenses for landlords for any missed items:

• Mileage, including gas and vehicle wear-and-tear
• Meals and food-related expenses
• Cost of transportation, i.e., bus ticket
• Baggage fees on flights

Not all of these deductions will apply to how you work. Most landlords do not travel via airplane for rental property business, but some with an eye for long-term investments in other cities may need to include this expense. Consider your situation and how travel plays into your business. From there, list what costs should be included in your tax documents.

Yes. Mileage for traveling to and from your rental properties should be deducted from your taxes as long as the reason for the trip is business. This means you can include expenses incurred for trips related to property inspections , essential repairs, maintenance, lease signing appointments, property showings, and other necessary business activities.

Mileage accrued for capital improvements, such as replacing the roof on the house, should be excluded. These expenses are not ordinary and necessary to business, and as such, fall outside of the scope of deductible travel expenses.

This question gets a bit deeper into the complications of deducting travel expenses. Some landlords travel to multiple cities to determine where their next investment hub should be. This can incur large travel costs, which seem like they would be deductible.

However, there’s more to it.

Once you acquire your first property in the target market, you would need to depreciate the travel cost over a standard deduction period of 27.5 years. This is due to capitalization rules and the expansion of your business. The expenses are considered business startup expenses and are only deductible through depreciation.

Now you know how important it is for landlords to have a detailed record of their mileage and how it relates to their business. Though it can seem complicated to start tracking this information, it’s much easier once you set up a system.

Ensure you are doing the following for the most straightforward route to maximize profits:

• Keep a detailed record of your mileage, cost of gas, and other details. The more information, the better so you have options when determining tax calculation methods.
• Remember to include all eligible travel expenses, including applicable deprecation on any vehicles.
• Determine which type of tax deduction for mileage makes sense for your taxes and business expenses.

Mileage tracking doesn’t have to be complicated. Set up a system that works for you and adjust it over time if necessary. It doesn’t have to be perfect, but it does need to track essential info. You’re good to go if you have that ready for tax prep.

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10 rental property tax deductions.

If you are a rental property owner, you can claim certain tax deductions for your rental property. There are several deductions rental business owners can take advantage of, each of which will lower the amount of tax you have to pay to the IRS each tax year and help you save money.

Key Takeaways  

• Using tax deductions as a rental property owner will reduce the amount of tax owed to the IRS each year.
• Deducting mortgage interest, property taxes, depreciation, maintenance, insurance, and other costs helps property owners save money. 
• Many professional services related to rental properties are tax deductible, such as legal fees and tax software. 
• Certain costs like fines, uncollected rent, and personal expenses cannot be deducted.

Table of Contents

• 10 Tax Deductions for Rental Property
• What Rental Property Expenses Are Not Tax Deductible?
• Take Your Tax Preparation to the Next Level With FreshBooks
• Frequently Asked Questions

10 Tax Deductions For Rental Property

Tax deductions are legitimate, legal expenses that can be claimed to reduce your rental property tax payments to the IRS. The most common deductions are listed below. 

1. Mortgage Interest  

A mortgage interest deduction deduction is among the most common IRS rental property tax deductions, and is usually fully deductible. Called the “home mortgage interest deduction” or HMID, this tax break allows homeowners, including rental property owners, to subtract the mortgage interest payments made to their bank or private loan lender. This tax break could save you thousands of dollars at tax time. 

Note that if you were to rent out part of your home, the mortgage interest can be allocated between the primary home (on a Schedule A form) and the rental part (on a Schedule E form).

2. Property Taxes  

Property taxes may be deductible from your income tax bill once you have been taxed on the value of your home and any other real estate you own. These taxes are paid starting on the date of the property purchase. The type of taxation depends on the state that you live in.

3. Depreciation  

Tax deductions for rental property owners include the amount of market value loss, along with the cost of upkeep and improvement of the property, which is considered part of an income-earning rental business endeavor. Residential rental properties can be depreciated over 27.5 years. The IRS allows a specific amount, usually 3.636%, to be deducted from your annual taxable rental income as a depreciation tax break. 

Improvements to the property and their associated costs can also be depreciated, when they add to its value and usefulness and are expected to last for over 1 year, like updating the electrical system or putting on a new roof. Those costs can be segregated into different depreciation schedules and depreciated quicker than the main building.

4. Maintenance and Repairs  

Maintenance and repair costs are deductible expenses for your rental property if they are necessary and ordinary operating expenses. Routine maintenance must be necessary and reasonable, it must keep your property in rentable condition but all maintenance and repairs must not add significant value to the property. 

5. Insurance  

Having insurance is a smart idea for any property owner and is often mandated by lenders and banks before a mortgage can be finalized during any property purchase. The IRS considers basic homeowners insurance premiums, as well as special liability insurance, to be normal rental expense costs and allows these costs to be deductible expenses. Similarly, property value losses due to theft or natural disasters are also deductible in many cases. 

6. Travel and Transportation  

Some landlords have several properties and need to travel often to visit them. These transportation and travel expenses are deductible, the same way traveling for any job would be. You may deduct costs incurred traveling to collect rent, showing your rental property, and working on your property. Other expenses like parking, tolls, airfare, hotels, rented cars, etc. may also be added in some cases.

7. Utilities  

If you are a landlord who covers bills like electricity, heat, internet, cable, and gas for your tenants, you can deduct these costs on your tax return. If you do not pay these bills for your tenants, then you cannot claim them for your rental property tax deductions. 

Some client/tenant agreements will have the landlord pay for these services to claim as deductions, and then the client reimburses them, which needs then be claimed as taxable income. This arrangement may be more or less helpful for you, depending on your individual case.

8. Employees’ and Contractors’ Wages  

When your rental property needs repairs and maintenance, you can deduct the cost of hiring an employee or contractor to do the rental home repairs. There is also the option to deduct tools and equipment if you choose to do the repairs yourself.

If you decide to hire somebody as an on- or off-site property manager for your rental properties, their wages and contractor fees can also be deducted at tax time. Worker’s compensation insurance can also be deducted if you have employees who help you with the rental real estate.

9. Legal and Professional Fees   

Record-keeping costs, tax software or tax professional costs, lawyer fees, real estate agent commission fees, and other professional services fees related to rental property paperwork, finances, legal issues, and more can be deducted, as long as they are related to the business of renting out your property for financial gain. 

You may also be able to write off financial advisor fees if you are discussing your rental property, as well as the legal costs incurred during eviction processes. 

10. Advertising Costs  

If you advertise your rental property online, in newspapers, on the radio, or elsewhere, and it has cost you money to do so, you can deduct the costs of advertising from your taxes. This also includes the cost of printing “For Sale” signs, posting printed ads around college campuses, and any other related advertising costs for your rental property business.  

If you are a property owner or landlord exploring ways to optimize your financial strategy, check out the following video to find out how FreshBooks can make tax preparation easier for you, specifically streamlining the process of managing and maximizing landlord tax deductions . 

What Rental Property Expenses Are Not Tax-Deductible?  

Some items that are not allowable rental property tax deductions include:

• Tenant-paid expenses, like if your tenants pay their own cable bills or electricity bills
• Improvements to the property are not deductible when you pay for them, but you can depreciate them over time to count the expense
• Penalties and fines of any kind cannot be deducted
• Land does not depreciate in value, so you cannot claim depreciation on any land value
• Personal expenses that are unaffiliated with the rental property 
• Expenses that incur when the property is not available for rental 

Take Your Tax Preparation to the Next Level With Freshbooks  

When you own a rental property, it’s important to keep good records of all expenses, with receipts, logs, diaries, appointment books, etc. to back up your expense claims. FreshBooks accounting software helps small business owners keep track of every expense, categorizing them to make it easier to get every eligible deduction during tax time. 

Ready to streamline your small business accounting processes and make life easier for yourself? Try FreshBooks for free , and find out how easy tax preparation can be. Along with making your investment property deductions easier, FreshBooks helps track expenses and keeps collected payments organized.

For more information about the deductions available to you and how to use them, see our article on Small Business Tax Deductions .

FAQs About Rental Property Tax Deductions

The answer to the question, “What are the tax deductions for a rental property?” is clearly laid out on the IRS website. If you have further questions regarding rental property tax deductions, our frequently asked question section may have the answer you’re looking for. 

Are rental property tax deductions different from those for personal property? 

Yes, rental property tax benefits are similar to small business tax deductions. Rental income is treated as income, and deductions are related to your potential earnings as a small business owner. Personal property can include livestock, RVs, cars, or equipment, while only permanent structures are considered rental properties. 

Are property management fees tax-deductible for rental properties? 

Yes, if you hire somebody to manage your property, the fees for their professional services are tax-deductible in the USA. This includes on-site property managers or off-site management companies. You can also deduct condo fees or other such management, upkeep, or repair fees from your taxes. 

Are legal fees associated with rental property tax-deductible?  

Yes, legal fees can be tax-deductible, as long as they are directly related to the property rental. This includes paperwork needed for rentals or evictions, or other necessary expenses related to renting out properties, and any fees needed to pay for resolving tax issues related to your rental property. 

Can I deduct utilities like electricity, water, and internet for my rental property?   

Yes, you can deduct utilities in some cases. It depends on what is included in the rental cost for your tenants. If you pay these bills, the amount can be deducted. If your tenant pays for their own utilities, then they are not tax deductible. If you pay for utilities and are reimbursed by the tenant, these payments add to your year’s total rental property income amount. 

How do I handle rental property tax deductions if I use the property for personal use as well?  

You can only deduct expenses related to your rental and must divide your expenses between personal use and rental use. As per the IRS, if your rental use expenses are more than the gross rental income limitations, you may not be allowed to deduct all of your rental expenses. You may be able to carry forward the expenses to the next tax year.

Are losses from rental properties tax-deductible?  

Yes, a “Real Estate Loss Allowance”, allows those with 10% interest in a rental property to claim a deduction of up to $25,000 annually in rental property losses against their regular income, as long as they have a gross income of $100,000 or less, and they are not a real estate professional. The real estate professional status allows for additional deductions against their regular income.

More Useful Resources

Explore our diverse tax deduction guides catering to various niches. From small businesses to real estate agents, find valuable insights to optimize your tax savings.

Sandra Habiger, CPA

About the author

Sandra Habiger is a Chartered Professional Accountant with a Bachelor’s Degree in Business Administration from the University of Washington. Sandra’s areas of focus include advising real estate agents, brokers, and investors. She supports small businesses in growing to their first six figures and beyond. Alongside her accounting practice, Sandra is a Money and Life Coach for women in business.

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Business Travel Expenses for Rental Owners [2023 Update]

In general, business travel expenses must be considered both “ordinary and necessary” to be tax-deductible. Ordinary means it is common and accepted within the trade or business. Necessary means it is helpful and appropriate for the trade or business.

As a real estate investor, you’ll likely travel to and from your rental properties, other business locations, new markets, and education related events. While most of these activities are indeed ordinary and necessary, you must understand the rules for deducting travel expenses.

Local Business Travel Expenses

Most rental property owners routinely travel to and from rental properties located within driving distance. You might also travel to the bank, the hardware store, or to meet with your broker, your attorney, and so on.

If you established a home office, these miles are considered business miles and are tax deductible within your “tax home.” Your “tax home” is considered the geographic location (that is, the city or locality) where you have an established rental business that functions as your place of business.

There are usually two ways you can deduct these trips: 

• using the actual expense method, or 
• the standard mileage deduction.

Both methods require you to keep an IRS-compliant mileage log that contains the following:

• odometer at the beginning of the year 
• odometer at the end of the year
• the date of your trip
• the purpose of the trip 
• the amount of miles of the trip
• locations of your trip

Remembering to log the trip each time you drive somewhere for business can be a challenge. Use an automatic mileage tracking app like MileIQ in tandem with Stessa’s mileage expense feature to make sure you’re not missing any deductible miles.

Standard Mileage Rate

The standard mileage rate is the simplest way to deduct local travel expenses because it requires the least amount of tracking. 

Simply take the number of miles you drove for business and multiply it by the standard mileage rate to get your deduction. The standard mileage rate for 2022 is 58.5 cents per mile for 1/1/22 – 6/30/22 and 62.5 cents per mile from 7/1/22 to 12/31/22. The Internal Revenue Service (IRS) has updated the optional standard mileage rate in 2023 to 65.5 cents per mile for business travel.

You drive a total of 10,000 miles in 2023. 6,700 of those were business miles. Your mileage deduction for 2023 is $4,388.50 ($0.655 x 6700 miles).

The sole actual expenses you can deduct under this method, in addition to the mileage, are parking fees, tolls, interest on a car loan, and personal property tax on the vehicle.

To use the standard mileage rate, you must use it in the first year you use your vehicle for business purposes, otherwise you can only use the actual expense method. However, you can later switch to the actual expense method, and back again, so it’s generally best to start with the standard mileage rate.

Actual Expense Method 

Under the actual expense method, you can deduct a portion of your actual expenses from operating your vehicle. These expenses include, but are not limited to:

• lease payments
• gas and oil
• tolls and parking fees
• depreciation
• interest on car loans
• repairs and maintenance
• car washing
• other fees (for example, registration fees)

Note: Tickets and violations are NOT tax deductible.

Your deduction is based on the percentage of actual miles driven that you used your vehicle for rental business. This percentage is determined by dividing the amount of miles you drove for business by the total miles you drove for the year (business miles/total business and personal miles).

You will also need to keep records (receipts) of all these expenses throughout the year. Stessa’s mobile app can help as it includes OCR and machine learning to capture and automatically categorize receipts for free.

You drove a total of 10,000 miles in 2022. 6,700 were business miles. Your business percentage for the vehicle is 67% (6,700/10,000). After tallying up all the expenses related to your vehicle, the total is $8,000 for the year. You can deduct $5,360 for 2022($8,000 x 67% ).

Business Travel Expenses for New Markets

Travel expenses are treated differently when traveling to a new market outside of your tax home. 

Travel expenses incurred to research and evaluate any new property that you eventually purchase outside of your tax home will be added to the basis of the property and depreciated over 27.5 years. Once you purchase a rental property in the new geographic area, additional new travel to the same area to evaluate other potential acquisitions becomes tax deductible as a business expense.

If your rental activities rise above the level of “investor” (Frank v. Comm’r., 20 T.C. 511) then travel costs to look for properties falls into two categories:

• Expenses incurred to look at properties you purchase, and
• Expenses incurred to look at properties you don’t purchase.

Expenses incurred to look at the property you ultimately acquire will be added to the basis and depreciated over 27.5 years (Rev. Rul. 77-254).

Expenses incurred to look at property within a geographic location in which you already operate as a landlord are fully deductible assuming they are ordinary and necessary for the conduct of your landlord business. Expenses incurred to look at a property in a geographic location in which you do not already operate as a landlord are considered business start-up expenses. This is documented in O’Donnell v. Comm’r., 62 T.C. 781.

As with other expenses, travel must be ordinary and necessary.

Perhaps surprisingly, travel expenses incurred to evaluate property in a new market in which you don’t eventually purchase a property are not immediately deductible. These are considered start-up expenses that can only be deducted after purchasing your first property in the new geographic area.

What Types of Business Travel Expenses are Deductible?

Transportation .

Transportation to and from the business destination is tax deductible. This includes but is not limited to:

• train and bus tickets
• car expenses (see above)

Other transportation costs that are deductible include:

• expenses for travel to and from the airport (taxi, bus, etc.)
• from the lodging area (hotel, Airbnb, etc.) to the business location (potential rental property, conference center, etc.)
• rental cars

Lodging expenses (such as a hotel, Airbnb, etc.) on overnight stays that are required for sleep or rest are deductible.

Other Expenses 

• business meals outside of your tax home are 50% tax deductible
• dry cleaning 
• other ordinary and necessary business travel expenses

Entertainment is no longer tax deductible under The Tax Cuts and Jobs Act.

Mixing Personal & Business Travel

When you mix business travel with personal travel as many small business owners do, some of the expenses (like airfare) may still be tax deductible if the trip was primarily for business purposes. 

In general, this means you should be spending more than half of the total number of days you’re traveling on business activities versus personal activities. A day is considered a business day if you spend four or more hours on business activities.

However, lodging expenses, meals, and other expenses incurred during days primarily dedicated to non-business purposes are not tax deductible. In addition, any travel expenses for a spouse (or child) that isn’t traveling for a “bona fide” business purpose is not tax deductible.

Also keep in mind that if the trip is primarily for personal purposes, travel to and from the destination is not tax deductible but business expenses incurred during the same trip are deductible. 

You go on a seven-day business trip to visit your out-of-state investment portfolio and spend five days on business and the other two at the beach.

Because this trip was primarily for business purposes, the entire round-trip airfare, plus lodging, meals and related expenses for the five business days are business-related tax deductible. However, lodging, meals, and other expenses from the two personal days are not deductible.

Check out more topics on rental property tax deductions: 

• Rental Property Accounting Basics
• 9 Common Landlord Tax Deductions
• Pass-Through Deductions and Casualty Losses
• Rental Property Depreciation Overview
• Capital Improvements vs. Repairs and Maintenance Expenses
• Passive Activity Limits and Passive Losses
• Capital Gains, Depreciation Recapture, and 1031 Exchange Rules
• Short-Term Rentals and Related Taxes

While reasonable efforts were taken to furnish accurate and up-to-date information, we do not warrant that the information contained in and made available through this guide is 100% accurate, complete, and error-free. We assume no liability or responsibility for any errors or omissions in this guide.

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Rental properties and travel expenses

If you have a residential rental property, you may not be able to claim a deduction for related travel expenses.

Last updated 29 June 2023

Deductions for travel expenses

You can't claim any deductions for the cost of travel you incur relating to your residential rental property unless you are either:

• in the business of letting rental properties
• an excluded entity .

Travel expenses include the costs you incur on car expenses, airfare, taxi, hire car, public transport, accommodation and meals to:

• inspect, maintain or collect rent for your rental property
• travel to any other place as long as it is associated with earning rental income from your existing rental property (for example, visiting your real estate agent to discuss your current rental property).

A residential premises (property) is land or a building that is:

• occupied as a residence or for residential accommodation
• intended to be occupied, and is capable of being occupied, as a residence or for residential accommodation.

If you don't have an ownership interest in the rental property (whether it is a residential rental property or commercial rental property), you can't claim travel expenses, even if you travel for the purposes of maintenance or inspections.

Example: Ownership interest

Kei is the sole owner of a commercial rental property. Her husband, Bert, occasionally drives to the rental property in his own car to undertake maintenance. As he has no ownership interest in the property, Bert can't claim travel expenses. Similarly, since Kei didn't travel to the property to undertake the maintenance, she can't claim a deduction.

As the property is a commercial rental property rather than a residential rental property, if Kei and Bert co-owned the property, Bert could share his travel expenses with Kei in line with their legal interest in the property.

For travel before 1 July 2017, you:

• can claim your travel expenses
• can't include your travel expenses in the cost base for calculating your capital gain or capital loss when you sell the property.

In the business of letting rental properties

You can claim your travel expenses if you are in the business of letting rental properties. Generally, owning one or several rental properties will not be considered being in the business of letting rental properties.

If you are an individual and you receive income from letting property to a tenant, or multiple tenants, you are not typically carrying on a business of letting rental properties. Generally, we consider your activities are a form of investment rather than a business, so you can't claim deductions for travel expenses.

Entities that can claim travel expenses

You can claim travel expenses, if you're a:

• corporate tax entity
• superannuation plan that is not a self-managed superannuation fund
• public unit trust
• managed investment trust
• unit trust or a partnership, where all of the members are entities of a type listed above.

Example: An individual with residential investment property in 2022–23

Sarah owned and rented out her residential rental property in 2022–23. She travelled to the property to repair damages caused by tenants during the year.

As the investment is a residential property and Sarah is not in the business of letting rental properties or an excluded entity, she can't claim a deduction for her travel expense.

Example: An excluded entity in 2022–23

Terry's Pty Ltd, a property manager, incurred travel expenses in 2022–23 to inspect a tenanted residential investment property. Since Terry's Pty Ltd is a corporate tax entity (a company), it can claim a deduction for travel expenses.

Travel expenses you can't claim

Even if you are eligible to claim travel expenses, you still can't claim for expenses such as:

• your personal use of the property or for purely private purposes
• carrying out general maintenance of the property while it's not genuinely available for rent
• undertaking repairs, where those repairs are not because of damage or wear and tear incurred while you rented out the property.

For example, if you travel to undertake initial repairs before you rent the property for the first time, these are capital expenses and may be included as part of the cost base for capital gains tax calculation when the property is being sold later.

If your travel expenses are partly for private purposes and partly related to the rental property, you can only claim the amount relating to the rental property.

Travel expenses before you purchase

You can't claim for travel expenses to inspect a property before you buy it.

You can't claim for travel expenses to (or other costs for) rental seminars about helping you find a rental property to invest in.

Seminars are only tax deductible if they relate to earning rental income from your existing rental property. So, when a seminar teaches you how to locate a suitable rental property to buy, you can't claim a deduction against rental income for the cost of the seminar because the costs incurred 'too soon' before the commencement of the income producing activity.

Some promoters have incorrectly told taxpayers that they can claim the cost of their travel to and from a property they may purchase. You can't claim these costs, neither for properties within Australia nor overseas.

Travel expenses you can claim

If you are in the business of letting rental properties or an excluded entity , and eligible to claim travel expenses, the types of expenses you can claim include:

• preparing the property for new tenants (except for the first tenants)
• inspecting the property during or at the end of tenancy
• undertaking repairs, where those repairs are because of damage or wear and tear incurred while you rented out the property
• maintaining the property, such as cleaning and gardening, while it is rented or genuinely available for rent
• collecting the rent
• visiting your agent to discuss your rental property.

For more information, see Rental expenses to claim .

If you use your own car to travel to inspect your rental property or to collect rent, you must use the same method to calculate your deductions as work-related car expenses .

Overnight travel

You can claim a deduction for travel expenses for travelling to your rental property if:

• you own a rental property that is far away from where you live
• it would be unreasonable to expect you not to stay near the rental property overnight when making an inspection
• your main purpose in travelling was to inspect and maintain the rental property.

Where you stay overnight, you can claim meals and accommodation.

Where your trip is mainly for private purposes (for example, having a holiday) and inspecting the property is incidental to that main purpose, you can't claim the costs of getting to your destination or returning home. You can only claim local expenses incurred after you arrive at your destination that are directly related to the property inspection such as taxi fares to and from the rental property. You may also be able to claim a proportion of your accommodation expenses.

Example: Apportionment of travel expenses

Bill and Marli King are joint owners of a residential rental property in a resort town on the north coast of Queensland. In 2016–17, they spent $1,800 on airfares and $1,500 on accommodation when they travelled from their home in Melbourne, mainly for the purpose of holidaying in the resort town, but also to inspect the property. They also spent $100 on taxi fares from the hotel to the rental property and back. The Kings spent:

• one day (10% of their total time in Queensland) on matters relating to the rental property
• nine days (90% of their total time in Queensland) swimming and sightseeing.

They can't claim a deduction for any part of the $1,800 airfares because the main purpose of the trip is a holiday and the property inspection is incidental.

Since the travel expenses were incurred in the 2016–17 year, they can claim deductions for the $100 taxi fare and $150 as a reasonable apportionment of the accommodation expenses (that is, 10% of $1,500).

The total expenses the Kings can claim are therefore $250 (that is, $100 tax fare plus $150 accommodation). Since they jointly own the rental property, they can claim a deduction of $125 each.

Example: Apportioning accommodation expenses

Jabari is the sole owner of a rental property on the Gold Coast. In 2016–17, he travels from Sydney to the Gold Coast to undertake deductible repairs on his rental property but takes his spouse, Kym, with him for company and to share the driving. Jabari and Kym stay in a hotel where the cost of a:

• single room is $55
• double room is $70

A reasonable basis for apportionment of accommodation expenses in this instance is to claim the single room rate of $55 (rather than half the double room rate), as Jabari would have stayed in the single room if Kym had not travelled with him.

Overseas travel

If you are an Australian resident and own a rental property overseas, you may travel overseas on holiday and inspect your rental property at the same time.

If the main purpose of the trip is a holiday, you can't claim the cost of getting there. You can only claim local expenses incurred after you arrive at your destination that are directly related to inspecting the property, such as taxi fares to and from the rental property. You may also be able to claim a deduction for part of your accommodation expenses.

You must be able to show your reason for visiting the rental property.

The records you keep, such as invoices for your accommodation or airline tickets, will help you do this.

Record keeping for travel expenses

If you travel over a considerable distance to inspect a rental property (for example, interstate), you need written records to show that you travelled and what expenses you incurred.

Written records can include:

• a travel diary
• airline tickets
• accommodation
• other purchases while travelling
• items you used for repairs and maintenance that you purchased when you travelled to, or stayed near, the rental property.

If you spend 6 or more nights away from where you live, you must keep a travel diary or similar document that shows the nature of the activities, dates, places, times and duration of your activities and travel.

Example: Individual with a commercial investment property

In 2022–23, Greg purchased a shopfront and leased the property to Paul. Paul used the shopfront to operate a bakery and paid rent to Greg under a 12 month contract.

Greg travelled to the shopfront to inspect the property at the end of the tenancy agreement. As the property was used for commercial purposes, Greg can claim the travel expenses.

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Rental expenses you can deduct

You can deduct any reasonable expenses you incur to earn rental income. The two basic types of expenses are current expenses and capital expenses .

For more information on what we consider a current or capital expense, go to Current expenses or capital expenses .

Some expenses you incur are not deductible. For more information, go to Rental expenses you cannot deduct .

If you are modifying a building to accommodate persons with disabilities, buying an older building, or encounter other situations, go to Capital expenses – Special situations .

The following is a list of expenses that are deductible:

• advertising
• interest and bank charges
• office expenses
• professional fees (includes legal and accounting fees)
• management and administration fees
• repairs and maintenance
• salaries, wages, and benefits (including employer's contributions)
• property taxes
• motor vehicle expenses
• other rental expenses
• prepaid expenses

Advertising

You can deduct expenses for advertising, including advertising in Canadian newspapers and on Canadian television and radio stations. You can also include any amount you paid as a finder's fee.

You can deduct the premiums you pay on your rental property for the current year. If your policy gives coverage for more than one year, deduct only the premiums related to the current year.

Deduct the remaining premiums in the year(s) to which they relate.

Office expenses

You can deduct the cost of office expenses. These include small items such as pens, pencils, paper clips, stationery and stamps. Office expenses do not include capital expenditures to acquire capital property such as calculators, filing cabinets, chairs and a desk. These are capital items.

Professional fees (includes legal and accounting fees)

You can deduct fees for legal services to prepare leases or collect overdue rents.

If you incur legal fees to buy your rental property, you cannot deduct them from your gross rental income. Instead, divide the fees between land and building and add them to their respective cost.

You buy a property worth $200,000 ($50,000 for the land and $150,000 for the building) and incur legal fees of $10,000.

Split the $10,000 proportionately between the land and building. In this case, $2,500 is added to the cost of the land (for a total of $52,500) and $7,500 is added to the cost of the building (for a total of $157,500).

The legal fees you paid when selling your rental property are deducted from your proceeds of disposition when calculating your capital gain or capital loss . The deduction for legal fees also applies when calculating a recapture of capital cost allowance or a terminal loss.

You can also deduct expenses you had for bookkeeping services, audits of your records and preparing financial statements. You may be able to deduct fees and expenses for advice and help to prepare your income tax and any related information returns.

Management and administration fees

You can deduct the amounts paid to a person or a company to manage your property.

You can also deduct amounts paid or payable to agents for collecting rents or finding new tenants.

If you paid commissions to a real estate agent when selling your rental property, include them as outlays and expenses on Schedule 3, Capital Gains (or Losses) , when you report the disposition of your property.

Repairs and maintenance

You can deduct the cost of labour and materials for any minor repairs or maintenance done to property you use to earn income. You cannot deduct the value of your own labour.

You cannot deduct costs you incur for repairs that are capital in nature. However, you can claim capital cost allowance.  

Salaries, wages, and benefits (including employer's contributions)

You can deduct amounts paid or payable to superintendents, maintenance personnel and others you employ to take care of your rental property. You cannot deduct the value of your own services.

As the employer, you must deduct your part of the following contributions:

• Canada Pension Plan (CPP)
• Quebec Pension Plan (QPP)
• Employment insurance premiums

You can also deduct workers' compensation amounts payable on employees' remuneration and Provincial Parental Insurance Plan (PPIP) premiums. The PPIP is an income replacement plan for residents of Quebec. For details, contact Revenu Québec.

For more information on making payroll deductions, go to Payroll .  

You can also deduct any insurance premiums you pay for an employee for a sickness, an accident, a disability or an income insurance plan.

For more information on wages, go to Guide T4001, Employers' Guide – Payroll Deductions and Remittances .

Property taxes

You can deduct property taxes you incurred for your rental property for the period it was available for rent. For example, you can deduct property taxes for the land and building where your rental property is situated. For more information, go to Vacant land and  Construction soft costs .

You can deduct travel expenses you incur to collect rents, supervise repairs and manage your properties.

Travel expenses include the cost of getting to your rental property but do not include board and lodging, which we consider to be personal expenses.

To claim the travel expenses you incur, you need to meet the same requirements discussed in Motor vehicle expenses .

You can deduct expenses for utilities, such as gas, oil, electricity, water and cable, if your rental arrangement specifies that you pay for the utilities of your rental space or units.

Prepaid expenses

A prepaid expense is an expense you paid for ahead of time. Under the accrual method of accounting, claim the expense you prepay in the year or years in which you get the related benefit.

Under the cash method of accounting, you cannot deduct a prepaid expense amount (other than for inventory) relating to a tax year that is two or more years after the year the expense is paid. However, you can deduct the part of an amount you paid in a previous year for benefits received in the current tax year. These amounts are deductible as long as you have not previously deducted them. 

Maria paid $2,100 for insurance on her rental property. The insurance was for the current tax year and the two following years. Although she paid the insurance for three years, she can deduct only the part that applies to the current tax year from her gross rental income. Therefore, she can deduct $700 in the current tax year and $700 in each of the following two years.

Forms and publications

• Guide T4036, Rental Income
• Form T776, Statement of Real Estate Rentals
• Interpretation Bulletin IT-417, Prepaid Expenses and Deferred Charges
• Form T2125, Statement of Business or Professional Activities
• Guide T4002, Self-employed Business, Professional, Commission, Farming, and Fishing Income

Related link

• GST/HST rebate for partners

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Topic no. 511, Business travel expenses

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Travel expenses are the ordinary and necessary expenses of traveling away from home for your business, profession, or job. You can't deduct expenses that are lavish or extravagant, or that are for personal purposes.

You're traveling away from home if your duties require you to be away from the general area of your tax home for a period substantially longer than an ordinary day's work, and you need to get sleep or rest to meet the demands of your work while away.

Generally, your tax home is the entire city or general area where your main place of business or work is located, regardless of where you maintain your family home. For example, you live with your family in Chicago but work in Milwaukee where you stay in a hotel and eat in restaurants. You return to Chicago every weekend. You may not deduct any of your travel, meals or lodging in Milwaukee because that's your tax home. Your travel on weekends to your family home in Chicago isn't for your work, so these expenses are also not deductible. If you regularly work in more than one place, your tax home is the general area where your main place of business or work is located.

In determining your main place of business, take into account the length of time you normally need to spend at each location for business purposes, the degree of business activity in each area, and the relative significance of the financial return from each area. However, the most important consideration is the length of time you spend at each location.

You can deduct travel expenses paid or incurred in connection with a temporary work assignment away from home. However, you can't deduct travel expenses paid in connection with an indefinite work assignment. Any work assignment in excess of one year is considered indefinite. Also, you may not deduct travel expenses at a work location if you realistically expect that you'll work there for more than one year, whether or not you actually work there that long. If you realistically expect to work at a temporary location for one year or less, and the expectation changes so that at some point you realistically expect to work there for more than one year, travel expenses become nondeductible when your expectation changes.

Travel expenses for conventions are deductible if you can show that your attendance benefits your trade or business. Special rules apply to conventions held outside the North American area.

Deductible travel expenses while away from home include, but aren't limited to, the costs of:

• Travel by airplane, train, bus or car between your home and your business destination. (If you're provided with a ticket or you're riding free as a result of a frequent traveler or similar program, your cost is zero.)
• The airport or train station and your hotel,
• The hotel and the work location of your customers or clients, your business meeting place, or your temporary work location.
• Shipping of baggage, and sample or display material between your regular and temporary work locations.
• Using your car while at your business destination. You can deduct actual expenses or the standard mileage rate, as well as business-related tolls and parking fees. If you rent a car, you can deduct only the business-use portion for the expenses.
• Lodging and non-entertainment-related meals.
• Dry cleaning and laundry.
• Business calls while on your business trip. (This includes business communications by fax machine or other communication devices.)
• Tips you pay for services related to any of these expenses.
• Other similar ordinary and necessary expenses related to your business travel. (These expenses might include transportation to and from a business meal, public stenographer's fees, computer rental fees, and operating and maintaining a house trailer.)

Instead of keeping records of your meal expenses and deducting the actual cost, you can generally use a standard meal allowance, which varies depending on where you travel. The deduction for business meals is generally limited to 50% of the unreimbursed cost.

If you're self-employed, you can deduct travel expenses on Schedule C (Form 1040), Profit or Loss From Business (Sole Proprietorship) , or if you're a farmer, on Schedule F (Form 1040), Profit or Loss From Farming .

If you're a member of the National Guard or military reserve, you may be able to claim a deduction for unreimbursed travel expenses paid in connection with the performance of services as a reservist that reduces your adjusted gross income. This travel must be overnight and more than 100 miles from your home. Expenses must be ordinary and necessary. This deduction is limited to the regular federal per diem rate (for lodging, meals, and incidental expenses) and the standard mileage rate (for car expenses) plus any parking fees, ferry fees, and tolls. Claim these expenses on Form 2106, Employee Business Expenses and report them on Form 1040 , Form 1040-SR , or Form 1040-NR as an adjustment to income.

Good records are essential. Refer to Topic no. 305 for information on recordkeeping. For more information on these and other travel expenses, refer to Publication 463, Travel, Entertainment, Gift, and Car Expenses .

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Can You Deduct Your Trip From Your Taxes? Experts Weigh In

P eople are traveling like crazy these days. The Sunday after Thanksgiving 2023 was the biggest single travel day in U.S. aviation history, with TSA screening more than 2.9 million passengers on November 26.

If you're one of those travelers racking up frequent flier miles as quickly as you can fasten your seat belt, you may be looking for ways to recoup some of the cost. Can you legally write off your trip? If you're self-employed (for example, if you're an entrepreneur, freelancer, or consultant, or have an online business) and you did some work while on the road, there's a good chance you can.

Here's what it takes to get two thumbs up from the IRS.

Pass these four tests

For starters, your trip must have a business purpose, meaning it must include activities such as client meetings, attending a conference, being a guest speaker at a conference, doing research and development for the business, or holding a board meeting or annual shareholders' meeting. The activity should have the potential to generate revenue.

"Don't think you can take a personal trip, talk business for an hour and then try and deduct the whole amount of your trip. The intent of the trip needs to be business," says Caitlynn Eldridge, founder and CEO of Eldridge CPA .

The second and third requirements deem that the trip must be both "ordinary and necessary," according to IRS guidelines on business travel expenses . "An ordinary expense means it's typical in your business, both [in terms of] amount [as well as in] frequency and purpose. Necessary means it actually helps you increase your profits or expand your business," explains Tom Wheelwright, a certified public accountant and author of the book Tax-Free Wealth (BZK Press, 2018).

Lastly, every expense must be properly documented. To get a deduction for travel, Wheelwright said that you must spend more than half your time during the business day doing business and have everything documented. "So, if you spend four and a half hours a day doing business, it becomes deductible. You also must have documentation, which includes receipts, of what you did, and a log of your expenses," says Wheelwright.

On receipts, write the name of the client who you had the meal with for further proof. "Save the emailed confirmation and receipt from the hotel reservation or conference ticket payment that show the dates, times, and name of the events as well as the receipts from the travel it took to get there and back [such as for gas or flights]," says Ben Watson, founder of Fiscal Fluency , a personal finance and business coaching company.

Note that for 2024, the IRS mileage reimbursement rate is 67 cents for employees or a self-employed individual traveling for work, up from 65.5 cents in 2023.

Know, too, that you must be away from home overnight-the IRS requires an overnight stay for the trip to qualify as business travel, Wheelwright says.

Domestic travel versus travel abroad

There's a big difference between how you calculate deductions if the work trip was taken in the United States versus abroad. According to Wheelwright, "It's an all-or-nothing test in the U.S., so either you spent more than 50 percent of your time on business, and it's all deductible, or you spent 50 percent or less and none of it's deductible."

For international business travel, the deductions work differently. He explained that when you travel to another country, the deduction is proportionate. "For example, if you spent 40 percent of your time doing business in Italy, then 40 percent is deductible," says Wheelwright.

Stick to the rules

It has to be a legitimate business trip. "You can't simply do some work while on the beach and call it a business trip," says Watson. But if you make it a "bleisure trip" by adding a couple days at the beach onto your preplanned business trip to the coast, you could still write off at least some of your lodging fees, he explained. If you do extend your trip for vacation, you can only deduct the expenses that were directly related to work and took place on the days that you conducted business. If you are traveling to multiple cities, keep in mind that each must have a business purpose.

You do have to work. If you are at a conference, make sure you fully participate, which means not just attending one or two sessions. If you only attend a small number of the business-related events, the entire purpose of the trip would be considered a personal trip with "incidental" business activities, Watson points out. Remember you need a log of what you did, and if it's thin on details, it could prove problematic. "You don't want to lose the ability to deduct transportation, lodging, meals, and other expenses," says Watson.

If it's a business trip of your own making, be sure it includes meetings with clients or participating in some work-related activity. "To demonstrate evidence of these events, it's wise to put calendar appointments down in your phone in advance and hold onto receipts when the time comes to file your tax return and claim your deductions. Remember, the primary purpose of this trip is [supposed to be] for work," says Riley Adams, a CPA and CEO and founder of WealthUp , a financial literacy website.

Don't try to bend what "ordinary and necessary" means. "If you have the ability to accomplish the same business tasks while staying at a modest hotel as you would at the Four Seasons, you'll have a hard time justifying the extra cost if you're ever audited," Watson cautions.

Stay at a place that is similar to places you normally stay on a business trip, so your expenses are considered "ordinary." Wheelwright explains that if you usually stay at five-star hotels for your business trips, then the Four Seasons would fall into the same category. However, if you usually stay at hotels like the Comfort Inn, and suddenly switch to a luxury hotel, the high-end venue could raise red flags with the IRS. He says that it doesn't matter whether you stay at a hotel or a vacation rental, the quality level and price tag should be similar to what is typical for your business trips.

When traveling with non–business companions, such as a spouse or family members, you may only deduct the cost of the lodging you would have paid if you were traveling alone-for example, if a single room costs $150 per night, and you paid $200 for a double room, you could only deduct at the $150 rate.

What can you deduct?

Personal meals are not deductible, but half the cost of food expenses related to business can be deducted. Expenses for your family's meals and entertainment cannot be deducted unless they are actively engaged in the business and you can show that their expense is both ordinary and necessary.

Travel expenses are only deductible on the days in which the work-related event occurs. "For example, a taxi ride to the meeting, train to a conference, or plane ride to the event [are deductible]," says Adams. "Lodging, much like travel expenses, is deductible on the days in which business is set to occur."

Understand too, that if you're provided with a plane ticket paid for by your company, or you're riding free because you're redeeming frequent flier miles, your cost is zero, so you can't deduct it.

But there are a couple of things you may not be aware of. For example, if you have to ship your baggage, you can deduct that cost; you also can deduct for tips for services, such as a tip to the waiter during a meal with a client.

Be strategic

It's best to put your "vacation" days in the middle of the business days, advises CPA Greg O'Brien. "For example, if [a] business owner took a seven-day trip to Florida and spent five days meeting with clients or prospects and two days relaxing on the beach, this would still qualify as a deductible business trip. The trick is to stick the ‘vacation' days in the middle of the business days," he says.

By placing the vacation days in the middle, the travel days to and from are still considered business related, rather than personal.

Watson offers another tip: "Laundry, dry-cleaning and shoe-shine expenses are perfectly acceptable expenses if incurred shortly after returning home."