Deducting Long-Distance Travel Expenses

As a successful real estate professional, it’s likely that you’re traveling for various reasons—meeting with lenders, investors, or partners, attending conferences, or simply managing your farther rentals. If you find yourself routinely traveling for your rental property business, then the associated expenses will pile up quickly. With the upcoming tax season, you may be wondering to yourself, “Can I deduct travel expenses for work?” If you closely follow the IRS’s guidelines, then yes, you can!

What Is the Long-Distance Travel Deduction?

The long-distance travel deduction is made for business owners to save a little bit of money where considerable business travel is concerned. This deduction is strictly reserved for travel that is directly related and necessary to your business, so you cannot deduct your family’s vacation airfare, even if you stay at one of your own rentals or something of a similar nature. Deductions on business trips can, however, include meal expenses, lodging, airfare, laundry, gas, incidental expenses, and much more.

The Internal Revenue Service (IRS) monitors this deduction and the validity of its claims closely, so as always, be sure to only report ordinary and necessary expenses—which we will discuss in depth later—when claiming this deduction. Failure to do so can result in an audit, fines, and other legal repercussions.

How to Qualify for the Long-Distance Travel Deduction

What Qualifies as Long-Distance Travel?

Long-distance travel is defined as traveling outside the general area of your tax home or main place of work by the IRS. To qualify as long-distance business travel, your trip must require you to:

• Be away from your tax home for “substantially longer than an ordinary day’s work”
• Sleep or rest in order to complete this work

This does not necessarily mean that you must be away for a fixed amount of time, only that you are traveling and working long enough to justify rest and meals. If you are unsure of whether your trip qualifies or not, talk to a trusted tax professional or do further research on the IRS website concerning traveling away from home.

What Expenses Qualify for Long-Distance Travel Deductions?

Given this definition, you may now be wondering, “So, how can you deduct travel expenses for work that qualifies?” You’ll want to keep in mind the general qualifications that your business travel expenses must meet. To qualify as deductible expenses, they must be:

• Ordinary and necessary, meaning it is not lavish or extravagant. If there is a significantly less expensive option available, it may raise some eyebrows.
• Business-related, meaning reasonably essential for you to conduct business. This includes expenses related to sleeping, eating, transportation, etc.

For example, when having meals on a business trip, you cannot eat exclusively at Michelin-Star restaurants or tip egregious amounts to a waiter if they are your friend. While there are no hard lines drawn as to what is considered lavish or extravagant, the IRS offers helpful definitions and examples of travel-related expenses, as well as this Travel Expenses You Can Deduct table.

Likewise, when on a business trip, you cannot deduct expenses when traveling anywhere other than your business-related locations. You can deduct a taxi fare from your hotel to your place of work, but you cannot deduct a taxi fare used for recreation on the same trip.

Additional Considerations

There are additional (and less common) nuances to consider for this deduction. For example, if you relocate for a temporary work assignment for under a year, then any incurred business expenses are tax deductible. If the relocation exceeds one year, then those expenses are no longer eligible for the travel deduction. Likewise, there are specific requirements for long-distance travel to business conventions held outside of North America. Be sure to find out whether there are any deduction restrictions such as these for your situation before you report deductions.

On a similar note, some may ask, “Can I deduct travel expenses related to purchasing real estate?” Once again, the answer is yes, but depending on the status of your real estate business, you may need to report it differently. If these travel expenses are incurred before your business opens, then they may qualify as start-up expenses, which are not reported the same way as travel-related operating expenses.

Calculating the Long-Distance Travel Deduction

One of the few caveats of the long-distance travel deduction is that you can only deduct 50% of each business meal, so you’ll need to keep this in consideration when recording and reporting your deductions. This does, however, include taxes and tips, so you can wait to calculate your 50% until after you’re charged the final amount.

Generally, most of your other long-distance travel expenses—transportation, lodging, laundry, communication, and more—can be 100% deducted. Calculating your deduction can be as simple as adding a few totals together. If, however, you go somewhere that offers both entertainment and a meal, you’ll want to subtract the cost of the entertainment from the total before reporting, as the entertainment will likely not be deductible.

Claiming/Reporting the Long-Distance Travel Deduction

To claim deductions related to long-distance travel, rental businesses will generally report the sum of each expense on Schedule E (Form 1040). As seen on the 2024 version, Part I outlines IRS landlord tax deductions for you to report. For example, any expenses related to transportation (whether it be taxi fares, subway fees, gasoline, parking fees, etc.), can be reported on Line 6, titled “Auto and travel.” Most other expenses are typically reported either on Line 6 as well or on Line 19, titled “Other.”

How Much Can I Save With the Long-Distance Travel Deduction?

Depending on how much you spend annually on long-distance travel expenses, you can save a very pretty penny. Landlords who manage a profitable property that they do not live near, for instance, can save thousands of dollars if they correctly report their array of incurred deductible travel expenses throughout the year. As you can imagine, it adds up surprisingly fast—even a single weekend business trip out to your property to perform necessary managerial duties can cost a few hundred dollars, and most of these expenses can be tax deductions. By reporting IRS landlord tax deductions related to your business destinations, you can lower your taxable income and line your wallet with hard-earned cash.

Conclusion

Whether you’re a frequent or infrequent business traveler, long-distance travel deductions are something you want to take advantage of as a landlord. As long as you carefully follow each of the IRS’s travel deduction guidelines, you can deduct business travel expenses and set yourself up for success, saving, and best of all, growth.