tax write off to look at properties

[Erik Pacpaco]

Just wondering whether you are able to consider a trip to California a tax write off if you schedule a meeting with a real estate agent to look at properties? If so, what kind of documentation would i need?

[Ashish Acharya]

@Erik Pacpaco,

As rental investors, your visit is mostly likely considered personal in nature if you have not identified property that are tying to close. 

If you had identified a property and traveled to close on a deal, then your cost would be added to the basis of the property. The cost incurred to go to look at the property once you have identified are Capital in nature ans increases your basis. They are not Deductible right away.

 Cost just to go look at the property it’s not deductible cost. This is mostly true for buy-and-hold investors. If you had a flipping business then cost to travel to look at the other properties would be cost of doing business and you could deduct that. 

What we have seen is, if people own bunch of properties and were traveling to expand their rental portfolio then people tend to prorate all the all the travel cost and report them under the existing existing properties. But that’s not the correct. 

If you had an entity that holds the other entities and you report bunch of administrative cost in that holding entity to Buy and hold the entity /properties then the cost of travel would be Deductible under the holding entity as business expense, not as a rental expense under your already existing properties.