Deducting your rental property travel expenses can save you a lot of money on your taxes. Many real estate investors can write off almost all travel-related costs associated with their rental properties. This includes mileage, meals, lodging, and other related expenses. By keeping track of all your deductions, you can reduce your taxable income and save money.
Key takeaways
- Rental property travel expenses are a deduction that many real estate investors can claim to reduce taxable net income.
- Common travel expense deductions for rental property include auto, travel expenses to visit a rental property in another location, and meals and lodging.
- Schedule E, Form 1040, is used to report rental property travel expenses and income and operating expenses at the end of each year.
What are rental property travel expenses?
Rental property owners can deduct many travel expenses. These include mileage, meals, lodging, and other travel-related costs:
- Mileage is a typical travel expense that can be deducted. For example, if you’re traveling to and from your rental property, you can deduct the mileage from your taxes. This includes the cost of gas and wear and tear on your vehicle.
- Meals are another typical travel expense that can be deducted. This includes the cost of restaurants and other food-related expenses.
- Lodging is another typical travel expense that can be deducted. This includes the cost of hotels, motels, and other lodging expenses.
- Other travel expenses that can be deducted include the cost of transportation, baggage fees, and tips. As a rule of thumb, real estate investors can deduct these costs from the rental income collected.
Keeping track of all your rental property travel expenses can help to reduce your taxable income and save money.
How to deduct rental property travel expenses from your taxes
If you’re a real estate investor, you can deduct your travel expenses from your taxable income.
When deducting travel expenses, keep track of all your receipts and expenses. This will help you stay organized and ensure that you can deduct all of your eligible expenses.
Simply fill out Schedule E, Form 1040, and attach it to your tax return to deduct your travel expenses. Keep accurate records of all your travel expenses so you can properly deduct them from your taxes.
What is Schedule E?
Real estate investors use Schedule E to report rental property income and expenses.
The Schedule E instructions booklet provides guidance on how to complete the form, including how to calculate your total rent receipts and deductible expenses. Schedule E is also used to report income or loss from partnerships, S corporations, estates, trusts, and real estate investment trusts (REITs).
If you have any questions about how to complete Schedule E, consult with a qualified tax professional or visit the Stessa Tax Center for helpful blog posts detailing tax preparation best practices, deduction strategies, and a suite of tax resources created in partnership with The Real Estate CPA.
How to keep track of all your deductions to save money on your taxes
Rental property owners know that there are many tax deductions available to them. However, keeping track of all of the different deductions can be a challenge. There are several methods and systems that landlords can use to keep track of their rental property tax deductions.
One popular method is to use a spreadsheet to track all of your expenses related to the property. This can be a helpful way to see at a glance what expenses are eligible for deduction and how much you can deduct each year.
Another option is to use special software designed specifically for tracking rental property tax deductions. This type of software can be particularly helpful if you own multiple properties, as it can help you track deductions across all of your properties in one place.
For example, Stessa, a Roofstock company, provides free rental property software for landlords to help them maximize profits through smart money management, automatic income and expense tracking, personalized reporting, and much more.
Over 100,000 investors are currently using Stessa to track over 250,000 properties with over $60 billion in asset value.
After signing up for a free Stessa account and entering property, bank, and mortgage account information, income and expense transactions are automatically synced. You can begin monitoring your rental property investments from a single, comprehensive online dashboard.
Rental property financial management software from Stessa can be used with an unlimited number of real estate portfolios and single-family rentals, small multifamily buildings with 2 to 4 units, and short-term vacation rentals.
Whichever method you choose, staying on top of your rental property tax deductions is essential to maintaining a healthy bottom line.
Common mistakes investors make when deducting rental property travel expenses
Many real estate investors make the mistake of thinking that any travel expense related to their rental property is deductible. However, there are a few key things to keep in mind when it comes to deducting rental property travel expenses.
First, the Internal Revenue Service (IRS) only allows you to deduct expenses that are considered “necessary and ordinary.” This means that you can’t deduct lavish expenses, such as first-class airfare or stays at luxury hotels.
Secondly, you can only deduct travel expenses directly related to your rental property. For example, if you drive to your rental property to perform repairs, you can deduct the cost of gas. However, if you meet up with friends for lunch after, that expense would not be deductible.
Finally, you can only deduct travel expenses that you actually incur. This means that if you drive your own car, you can only deduct the actual cost of gas, not a car rental cost.
By keeping these 3 things in mind, you can ensure that you’re taking all the proper deductions for your rental property travel expenses.
Topic No. 511 Business Travel Expenses from the IRS provides details on deductible travel expenses real estate investors can claim and common items that can and can’t be deducted.
Tips for claiming expenses
To claim these expenses, keep accurate records of all transactions related to the rental property. This includes receipts, invoices, and bank statements. In addition, you will need to keep track of the dates the expenses were incurred and the amount paid.
Final thoughts
Rental property travel expenses can be a great way to save money on your taxes. By keeping track of all your deductions, you can ensure that you take advantage of every possible opportunity to reduce your taxable income.
For more information on rental property tax deductions, investors may wish to review the instructions for IRS Schedule E (Form 1040), speak with a qualified accountant or tax advisor, and visit the Stessa Tax Center for a free tax guide and top tax deduction tips, including travel expenses.
