Can I deduct the travel expenses I incurred while searching for a 1031 replacement property? Should I claim the expenses as normal expenses or "start up" costs?
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bajaman47
New Member

Can I deduct the travel expenses I incurred while searching for a 1031 replacement property? Should I claim the expenses as normal expenses or "start up" costs?

how do I add start up costs to the basis of my rental property?

1 Reply
CherylW
Level 3

Can I deduct the travel expenses I incurred while searching for a 1031 replacement property? Should I claim the expenses as normal expenses or "start up" costs?

These are the costs you can write off in a 1031 exchange.  See below, from Knowing Your 1031 Exchange Deductions:

1031 Exchange Expenses that are Tax Deductions

Any expenses that are directly related to the sales transaction are 1031 exchange tax deductions.  This includes items such as:

  • Real estate broker commission costs
  • Accommodator fees
  • Escrow and title insurance fees and filing fees1
  • Transfer taxes (if applicable in the property’s location)2

Note that although you may have completed the work in order to achieve a better sales price, or even during escrow as part of the sales process, maintenance work such as painting would not be deductible from your 1031 exchange.  This work is deductible – but from your operating income.  

I couldn't find anything definitive on travel expenses, but I would think not:  although they're used to procure income-producing property, I don't think they're deductible as part of the cost.

Here's the full text of the article:

https://1031rps.com/1031-exchange-tax-deductions/

Start up costs should be set up to depreciate, not added to the basis of your property.



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