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azetracy
New Member

Expenses incurred while looking to purchase a rental

I am under contract to purchase a rental property in Hawaii & traveled in 2016. Property won't close until 2017. How can I deduct travel expenses related to this property?
1 Reply
PatriciaV
Employee Tax Expert

Expenses incurred while looking to purchase a rental

In most cases, expenses incurred before a Rental Property is made available to be rented are added to the basis of the property. In your case, the travel expenses may be included as Closing Costs when you add the Rental Property next year.

If, however, you are a Real Estate professional, in the business of renting properties, or hold your rental properties as an LLC, you may be able to deduct up to $5,000 of start-up costs in the year when the property is placed in service (available to be rented). The IRS allows the deduction of start-up costs for "active" businesses. See IRS Pub 535 Business Start-Up and Organizational Costs.

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