Mileage deduction for Real Estate dealer

[KJT2025]

I have purchased a house to flip January 2024 in an LLC one owner. It is on the market but hasn't sold yet. There was a few expenses in Nov & Dec 2023 leading up to the purchase in Jan 2024. I read on this community,  I only list those expenses to set this business should be claimed now and file everything else the year the house sells.. Can I also claim business mileage and tolls that were also in the pre-purchase period that are related to this property now or do I wait and add those when the house sells . Additionally my office is in my home, does mileage to the property and back even count. I have a GC but went to the property almost daily to make sure the project stayed on track.

[PatriciaV]

If you are in the business of real estate (and not a passive investor), your LLC expenses are deductible in the year they are paid. That would include vehicle/travel costs necessary to run your business.

Up to $5,000 in startup costs can be deducted in the year you opened for business. See IRS Pub 583 Business Start-Up Costs.

You have the option to add expenses directly relating to the investment property (carrying costs), such as property taxes and mortgage interest, to your basis in the property by making a Section 266 Election. This tax treatment may reduce your gain on the sale of the property in the future. See How do I make an election in Section 266 to capitalize the taxes paid to the basis of vacant propert...

[KJT2025]

Is the Section 266 something within the Schedule C I can't find it when I go to the Schedule C form?  

[PatriciaV]

No, it's a separate election form that you can create to accompany your return. Remember that you are capitalizing the expenses rather than reporting them for your business. Be sure to read the link in the previous post.

There is a blank statement form available in TurboTax Desktop (and TurboTax Business) using Forms Mode. However, you will need to file by mail in order to include this user-generated form. The statement must be included each year you elect to capitalize carrying costs.

Click the Forms icon in the TurboTax header. In the left column, click Open Form, then type in "blank form." Click on the form to open it in the large window. You can now type in the statement you need to include with your return.

Example for capitalizing property taxes (form lines are not numbered:(

Line 1: ELECTION TO CAPITALIZE CARRYING COSTS

Line 2: For the tax year 20XX, taxpayer hereby elects under Code Section 266

Line 3: and IRS Regulations 1.266-1 to capitalize, rather than deduct, the

Line 4: following carrying costs incurred with respect to 

Line 5: [describe property] located at [property location]

Line 6: XXX County AZ APN #XXX-XX-XXX-XX 3.5ac Lot 

Line 6, column 2: $235 (rounded)

Line 7: XXX County AZ APN #XXX-XX-XXX-XX 2.5ac Lot

Line 7, column 2: $123 (rounded)