Are travel costs related to purchase of a rental property deductible? If so, where do I enter this in Turbo Tax?

[macaroon]

I am purchasing a rental property in another city. I made a trip to go with a real estate agent to look for a property and I will be making another trip to go to the closing. Are the hotel, meal and mileage costs for either or both of these trips deductible in any way? I currently file a Schedule E for another property I own - this will be my second rental property. I don't think I can put the costs on Schedule E because they were incurred before the property was put into service. Is there another way? 

[PatriciaV · Accepted solution]

Unfortunately, unless you are a Real Estate Professional, the cost of researching a new property is not a deductible rental expense. These expenses may be considered acquisition costs to be added to the basis of the property. 

[RzRob]

Yes, any long distance travel to visit your assets or to conduct rental business can be tax-deductible as a business expense.

• Airline Fares
• Car Rentals and Taxis
• Hotels
• 50 percent of meal expenses during long-distance travel

The operative words are "CAN BE".   I agree with the other answerer who commented that travel expenses to research or pre-purchase the property would not be deductible, only the travel expenses after purchase would be deductible.

[SC89]

What about travel expenses related to the construction of the rental property out of town?  If you rent an apartment, have utilities, and meals?  You are overseeing the construction on a regular basis.

[Critter]

Until the property is ready for a renter you do not have a rental property so you cannot deduct any expenses related to the non existing rental ... all those costs must be capitalized ( added to the cost basis) and depreciated once the rental is placed IN SERVICE. 

[Bunny01]

What qualified as a real estate professional?  If i have my RE licence then I can expense the research travel? 

[LanceinDC]

What about the travel costs related to the closing/settlement of the property?  I've bought a rental near where I grew up and this required traveling up there to sign the paperwork and then while I was there to check out the house thoroughly.  Are any of those costs deductions?

[JohnB5677]

The statement that Critter made earlier is correct.  These expenses must be capitalized and depreciated once the rental is placed IN SERVICE. 

[susan483good]

My multi-member LLC purchased a a residential property with 19 units. If I/we travel to renovate one or two units, are those travel expenses (gas, hotel) capitalized or expensed?

One trip was to renovate one vacant unit. There were only 2 vacant units out of 18 units so the total property is already in service. One other unit was used by the previous property manager.

The second trip was to renovate the property manager unit and convert it into 2 units.

The 3rd trip will be to renovate the remaining vacant unit. 

Future trips will be to renovate units as necessary upon vacancy.

I assume the property is considered in service unless each unit needs to be evaluated to determine if that unit is in service.

Thanks.  

[PattiF]

The travel expenses that were incurred traveling to and from the residential property would be classified as expenses associated with the rental and entered in the Schedule E form.  

The entire 19 unit property as a whole  is considered in service even if a unit is being renovated.

[susan483good]

Since the LLC reimbursed the partner for their travel expenses, I assume it will flow through as loss/profit on the K-1 to the partners rather than Schedule E.

[DianeW777]

Yes, you are correct. If the LLC reimbursed the partners for their travel expenses that pertain to the partnership business, it will be an expense to the partnership. This will be incorporated into the profit/loss with no additional entry on the individual tax return (Schedule E).

[RJ39]

Where do I enter this information in Turbotax so I can capitalize it?

[GeorgeM777]

Rental property information, including that of a Real Estate Professional, is entered by the following steps:

• TurboTax online:

1. Select Income & Expenses,
2. scroll down the page to Rentals, Royalties, and Farm,
3. select Rental Properties,
4. respond to the questions, and enter your rental property information,
5. you will see a screen asking about the nature of your rental activities, such as how much time you devote to your rental activities,
6. respond accordingly to all questions,
7. based on your responses, TurboTax will determine whether you qualify as a Real Estate Professional.

Here is a link to IRS Publication 925 that you might find helpful.  At page 6 is where you will find information relating to Real Estate Professionals.

Passive Activities and the At Risk Rules

@RJ39

[hennesey7]

Similar question - I am closing on my first property in 20 days or so. Can I Deducting Landlord Out-of-Town Travel Expenses if i DO NOT HAVE AN LLC?

I plan to in the future - but not with just one condo.

Many thanks!