Mileage expense - can I expense during rehab?

Question

I know that as a landlord manager of my properties I can deduct at a rate of $0.56/mile the cost to drive to my rentals as long as I keep good records and for certain approved activities such as collecting rent; going to make repairs, etc. However, I'm looking a purchasing a fixer-upper that will take lots of trips and is about an hour away. Would be about $40/round trip in expenses if allowed. I am thinking that I can only expense after the place is being rented and expenses against rental income. Can someone tell me if I have a valid expense I can collect during the rehab period?

Ricky A. · Answer

$0.56 was the 2021 mileage rate.

Jan 1 - Jun 30, 2022 was $0.585.

Jul 1 - Dec 31, 2022 is $0.625.

2023 will probably be announced mid-to-late Dec.

https://www.irs.gov/newsroom/i...

Michael Plaks · Answer

While @Ashton Karp is correct in principle, there's a key piece missing in his understanding. You need to be in business for any business deductions to kick in. So we need to determine whether or not you're already in business as a landlord.

For your very first rental property, you're not in business until your property is ready and available for rent. In other words, until the rehab is finished. All expenses incurred during this "pre-business" period, including driving expenses, are added up and added to the cost (tax basis) of this first property. It ends up slowly depreciated and not immediately deducted. Once the property is ready - then you can start deducting mileage and other expenses.

Basit Siddiqi · Answer

if the property is not placed into service yet(still under rehab) and you are not in a trade or business, the costs would be capitalized.I recommend the app 'MilesIQ' to keep track of your business miles.

Mike Wilson · Answer

thanks to all that chimed in with a reply. Ricky A, thank you very much for the updated amount and potential upcoming changes!

Ashton Karp · Answer

My understanding is that any miles put on your vehicle for any business activity is an expense. Picking up materials for your property? Write off. Dropping off materials or installing them yourself? Write off. Driving to meet with contractors? Write off. If your business for this property is a loss due to no income (not rented yet) then you should be able to carry over that loss to the next year or potentially offset other income. Talk to your CPA for your specific circumstance.

Jake Smith · Answer

look into the app stride, its the best app I've found for tracking mileage.

Mileage expense - can I expense during rehab?

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