Tag Archives: rental property mileage

tax deductions for rental property travel

How to take tax deductions for travel to rental property

Deduct Mileage to and from Rental Property

You can take tax deductions for travel to rental properties if you know the rules.  Under normal circumstances travel from home to rental property would not be deductible.  The travel would be considered personal.  Traveling from home is commuting like driving to a job.

Like most things it is not black and white.  The key word in the sentence is the word “home.”  There is a provision to take a deduction for the travel if you meet certain criteria.

You can deduct mileage when traveling to your rental property if you meet two criteria

1)  You are engaged in the business of owning rental property

2)  You have a home office from which you commute.

So if you are in business and the primary location of the business is your home office, then the travel to the rental properties is deductible as a business expense.  You have to love our tax laws.

Rental Property is either Business or passive investment

26 U.S. Code § 1231 – Property used in the trade or business and involuntary conversions

(1)General rule The term “property used in the trade or business” means property used in the trade or business, of a character which is subject to the allowance for depreciation provided in section 167, held for more than 1 year, and real property used in the trade or business, held for more than 1 year,

Rental Property Business Activity

The rental properties meet the Section 1231 definition of property used in a trade or business.  You qualify as a business when you materially participate in running rental properties.  Material participation should be ongoing and regular to qualify.  Participation includes activities such as maintenance, hiring contractors, collecting rent, keeping accounts, screening tenants. Etc.  See How to claim passive loss limitation exemption for more criteria on being considered a business with active participation.

Rental Property Passive Investment

If you do not participate in the running of rental property, the IRS will see the activity as a passive investment.  Passive investments ae not running a business.  For example, I own stock in my 401k.  I do not participate in the decisions of the portfolio or manage the fund.  I am not a mutual fund manager Therefore; I am a passive investor.

Home office

If my regular place of business is my home office, then travel to the rental property is deductible because I am traveling as an active part of my trade or business.  I must let contractors in for maintenance.  I show the property to prospective tenants.  In fact, travelling to the properties to conduct these activities is one way to prove I am actively participating.

Benefits of Real Estate Businesses

The tax benefits of owning real estate are accelerated and enhanced if running them is treated as a business.  Jodywallrealtor.com and Cincero Investment Properties, Inc. exist in order to make real estate investing available and easy.

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