Ask The Guys: Can I Deduct Travel Expenses?
Here’s a question we got from Sue in California (thanks Sue!):
If we have a property manager, can we write off travel costs from CA to Memphis for us to visit the property? If so, how many times a year can we visit and write off the costs?
Since we aren’t tax gurus, we tossed the question to our good friend, CPA Tom Wheelwright, who answers:
The rule for any business expense is that in order for it to be deductible, it must have:
- a business purpose;
- be ordinary in the course of your business; and
- be necessary
If you are visiting the property to check up on it and the manager, clearly this will be a business purpose.
If the amount of the expense is reasonable compared to the income you make from the property, then you should meet the “ordinary” test.
If visiting the property will help you make more money from the property (meeting with the property manager, coming up with new ideas to increase the rent, etc.), then you should meet the “necessary” test.
Each time you visit, or incur any expense for that matter, you must meet all three of these tests. They are somewhat subjective, so be wise in how you document your expenses and the activities you pursue while you are visiting the property and/or the property manager.
So there you have it! From the brain of Tom to our blog.
Tom Wheelwright is a Certified Public Accountant and Robert Kiyosaki’s Rich Dad Advisor® for tax planning. Tom is also joining The Real Estate Guys™ as a faculty member for our 1oth Annual Investor Summit at Sea™ he will be teaching, talking tax and hanging with all of our Summiteers – including our very special guests Robert and Kim Kiyosaki LIVE and IN PERSON for the ENTIRE week! Plus, Tom is a frequent guest on The Real Estate Guys™ radio show where he shares valuable pearls of tax wisdom. Click here to hear the latest episode featuring Tom.
1/24/10: Practical Tax Tips and Insight with CPA Tom Wheelwright
It’s the most wonderful time of the year….
Not Christmas. Tax time! This is the time of year when all the bills from the holidays show up in the mail, along with your 1098’s, 1099’s, W2’s, 1040′s and our personal favorite, the K1. Let the fun begin!
Before you tune out, we invite you to listen to our recent interview with CPA Tom Wheelwright. He promised us he could make taxes fun, to which we said, “Great!”
So we broke out some month-old eggnog, stoked the fire in the fireplace, and tossed a few chestnuts into the pan for some good old fashion roasting.
Huddled around the microphones to talk taxes:
• Your Host, Robert Helms
• Co-host and Financial Strategist, Russell Gray
• A man who has probably paid more taxes than everyone else on the show combined, The Godfather of Real Estate, Bob Helms
• Certified Public Accountant, Tom Wheelwright
Like little kids on Christmas morning, we came into the studio to open up gifts of tax wisdom from one of the brightest real estate tax advisors we know. After a few opening comments, we got Tom Wheelwright on the phone and started the grilling.
Tom opened up with some paradigm breakers as he explained that taxes are not only fun, but actually a very powerful tool for wealth creation. Wow! Sounds good to us!
Then we asked him, “What are the most common and costly mistakes most real estate investors make?” One of his answers astounded us when he told us about a special form every investor should know about, but few use properly. Getting it wrong can cost you many thousands of dollars!
It would be sacrilegious to talk taxes and leave out 1031 exchanges, but for most experienced investors, the 1031 is old news. And in today’s challenging economy with so much equity in hiding, who cares about a 1031 anyway? So Tom gave us some great tips on why we might NOT want to use a 1031 exchange. What????
Now that the eggnog was kicking in, we got into some of the tax changes for 2010 (and beyond) that affect real estate investors. Then he gave us the inside scoop on how to find a great real estate CPA.
Before we knew it, the show was over! Time flies when you’re having fun. The topic wasn’t as taxing as we thought!
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