Writing off Out of State Travel?

Question

I ave a triplex in Texas I fly out to 4 times a year.  I was wondering if it's OK to write off all of flight.  I go mainly to meet with managers and do improvements.

Would it be OK to writeoff the Plane tickets?  I was wondering if that just goes under travel on the scedule E for tax writeoff and expenses.  It's about 25% of expenses.  But my accountant told me it's "too high" I can't write off that much.  Is that true? Or could I write it partially off under property management?

Ashish Acharya · Answer

@Susan O. ,

If planned correclty, most of the expenses will be deductible.

The actual costs of travel (e.g., plane fare, cab to airport, etc.) are deductible for out-of-town business trips. You're also allowed to deduct the cost of meals and lodging. Your meals are deductible even if they're not connected to a business conversation or other business function. As with all deductible meals, only 50% of the cost is allowed.Cant be Lavish or extravagant.

Personal entertainment costs on the trip aren't deductible, but business-related costs such as for dry-cleaning, phone calls, and rentals are.

Some allocations may be required if the trip is a combined business/pleasure trip, for example, if you fly to a location for five days of business and stay on for an additional period of vacation. Only the cost of meals, lodging, etc., for the business days are deductible—not for the personal vacation days.

On the other hand, with respect to the cost of the travel itself (plane fare, etc.), if the trip is “primarily” business, the travel cost can be deducted in its entirety and no allocation is required. Conversely, if the trip is primarily personal, none of the travel costs are deductible. An important factor in determining if the trip is primarily business or personal is the amount of time spent on each, although this isn't the sole factor.

Eamonn McElroy · Answer

As long as the business travel expense is ordinary and necessary (IRC Sec 162).

That said, to be fully written off, the trip should be 100% business.  No staying an extra day to go horseback riding...

Too low or too high really doesn't have anything to do with it.  It needs to be ordinary, necessary, documented, and supported.

Michael Plaks · Answer

@Susan O.

You would have to justify that your physical presence is beneficial for your business. In other words, if you're spending $2,000 for the 3 trips, it should make financial sense. How much your income would have been affected if you did not fly there, as opposed to flying?

So, as long as the trips are economically sensible, and your primary purpose is business - then you can deduct 100% of the tickets and the business portion of all other costs.

PS. Taking a broker or contractor to a baseball game is no longer deductible.

Greg H. · Answer

@Susan O.

You should be more specific than looking for workers in “Texas” as I am sure you realize that Texas is a huge state and recommendations could literally be 10+ hours away

Susan O. · Answer

I guess the next question is do you know of gardners handymen who are trustworthy and will do the small chores on a small Triplex in texas?  To me I haven't found one and I've been ripped off by several scammers and people who say they do the work and don't do it or just charge me for it.  When I show up they at least know I'm checking on them.  Hard to find someone who isn't a home depot day worker or an alcoholic contractor

The prop manager doesn't care about doing work with so few units.  If he does he just hires a contractor and upcharges 20%.  Doesn't make sense versus me paying $350 for a ticket and a $400 for rental car and

I'm a small timer and not local.  Very difficult to do the things your saying.

So if they did test me I'd just have to explain how I've been burned as an out of state person./  When you tell them your from california they don't do it for $20. They do it for $100 and often never do anything or just rip you off!

To me your presence even as an out of state landlord is so important

Michael Plaks · Answer

If you have a property management company, it is normally their job to find a contractor for repairs. Yes, $10-12k is a major job, but flying there makes it a $11-14k job - which may be justifiable and may be not.

Doing repairs and landscaping yourself poses the same question: how much are you saving by doing the work yourself v. how much you're spending on the trip. And again, having a management company makes it more difficult to justify.

Putting signs in laundry, rat traps and checking on gardener should be all handled by the management company. And if not - then you could hire someone off of Craigslist for $20 to do that for you and not spend hundreds of dollars on flying there yourself.

I think you understand the approach I'm using to test your arguments.

Sam Shueh · Answer

That depends on your other finances and tax bracket. If you go there 100% for business, that is one story. Most local landlords to do not make more than 1 local inspection per year, so IRS auditor wants to know you why are so motivated to spend 10 days a year there. Do you have a local PM?  If so that sounds even questionable.

The objective is claim some justified expenses not trigger further opportunities for more audit. Also repair and improvement are different things.  You replace a tile and replace the entire flooring will be questioned by the CPA who is questioning everything these days because IRS really crack down his integrity and license as well.

Susan O. · Answer

Thanks

So I assume meeting with contractors for a copper repipe ($10,000-$12,000) and property managemet and home depot for a new tenant paint could be interpreted as necessary to physical presence?

I also fly out 3-4 times just to check on the property and usually do landscaping, repairs, meetings with handymen, meetings with agents to see what rents are, and sometimes serve notices., and put up signs in laundry, put out rat traps, and check on gardener.

Susan O. · Answer

@Ashish acharya @Ashishacharya

So What if the trip is 90% business.  Like what if I decide I want to take the local property manager out to eat and discuss business at a meeting. Does this all need to be deducted. Would this be a requirement under the IRS?  What if I took a broker or contractor to baseball game for instance where we discussed rental business for part of it?

Susan O. · Answer

Thanks most of these trips are primarily business.  Sometimes there's a little pleasure involved but mainly rental biz

Writing off Out of State Travel?

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