Can trip expenses to go buy a first house be tax deductible?

[Michael Ndjondo makadi]

Good evening to all.

I am just getting started in my RE investment journey and after long thoughts I have finally decided to invest in Wichita, KS even if I live in San Diego. I have lived there for a couple of years and that market can offer some very nice CoC ROI and I have people there whom I can trust on helping me screening potential houses.

I have just finished reading this wonderful book "Tax strategies for the savvy RE investor" which I would highly recommend for any RE investors. From this book, I took that business trips such as travelling to go check on your houses  are tax deductible. So in my case that I don't have an investment yet and I would use that trip to go check on the property myself before closing, and also meet my realtor, perspective property management and some contractors. Could this trip be qualified as a business one and be tax deductible?

[Jake Hottenrott]

@Michael Ndjondo makadi - Good evening to you as well and congrats on deciding to purchase your first investment property!  

So bad news, because you are not currently in business (investing, renting, etc.) you will not be able to deduct them as a business expense under section 162.

The good news, because you have decided to go into business you will be able to elect to deduct up to $5,000 of these start up costs under section 195.  Anything you spend above and beyond that, will need to be amortized over a 180 month period.  

Here's a handy timeline chart that I used yesterday in a post to show where an expense should be allocated depending on where you are in the process.

There are a few other caveats regarding business trip deductions and start up expenses that you will want to talk to your tax professional about as well. 

I hope that helps!