Expenses Pertaining to Travel to/from Rental Properties

[Dicey]

Our rentals are about 500 miles from our home.

We made three trips, eighteen nights total, all for the completion of genuine repairs. We have all the necessary documentation to demonstrate the validity of these trips. That's more nights than normal, but we made a point to work on a single property per day so as not to carry germs from one tenant to the next.

We rent a car every trip, and use the mileage rate, because it's usually better.
We have no lodging expenses, as one of the properties has a casita.

Normally, I keep track of what we spend on meals and turn those numbers in to our CPA. Due to the pandemic, I prepared most of our meals ahead of time at home and packed coolers. We made, at most, one grocery run per trip.

How do I handle the food/meal expenses? Is there a per diem amount I can use? Spitball? Ignore this expense this year? What would you do?

I know I can ask my CPA at our tax appointment tomorrow, but I'd like to have all the information pulled together ahead of time. I've checked the IRS website, but I'm still not clear.

Thanks, mustachians!

[Dicey]

Huh. 60 views, no answers. I took my question to my CPA today.

Here's what I discovered, in layman's terms. Any tax pros who see this, feel free to jump in and clarify or correct.

Owning rentals is considered a business by the IRS. As a business traveler (the houses are 500 miles away from home), we are allowed a $55/day allowance for meals, subject to a 50% haircut. The 18 days amount to $990 for the two of us. Yowza!

Our CPA says this is a legit deduction. Now my question is WTF, dude? You've been doing my taxes since I bought the first of these rentals 18 years ago, and you never thought to mention this?

There we are. Hope this is useful to someone. Of course, I am not a tax professional and rarely know what the hell I'm talking about, so don't take my word for anything, especially if it's tax related.

[norajean]

Just be ready to justify that the trip and time spent is for rental business. How did you CPA arrive at $55/day for this particular expense?

[cool7hand]

Here's the guidance on ordinary and necessary business expenses: https://www.irs.gov/businesses/small-businesses-self-employed/deducting-business-expenses#:~:text=An%20ordinary%20expense%20is%20one,indispensable%20to%20be%20considered%20necessary.

I knew a lot of small business owners prior to FIRE. None of them would have sweated writing off the expenses you identify.

[Dicey]

Here's the guidance on ordinary and necessary business expenses: https://www.irs.gov/businesses/small-businesses-self-employed/deducting-business-expenses#:~:text=An%20ordinary%20expense%20is%20one,indispensable%20to%20be%20considered%20necessary.

I knew a lot of small business owners prior to FIRE. None of them would have sweated writing off the expenses you identify.

Thanks. I did poke around the IRS website a fair amount before I started this thread. I didn't know if owning a few rental properties made me a bona fide "small business owner" in the eyes of the IRS, and I knew for sure I was no one's employee.

[Dicey]

Just be ready to justify that the trip and time spent is for rental business. How did you CPA arrive at $55/day for this particular expense?

Not our first rodeo. We keep good records and it's a damn fucking long drive, so we never go without a legitimate reason or three. We do hire out for most minor things, so we can show that we're not just there to play in the sand and sunshine during the season.

For example, this last trip included repairing the broken central vac in one of the properties. Every vendor wanted to charge us a fuck-ton and replace the whole damn unit.* Instead, DH ordered the parts and fixed it himself, saving us big bucks. All three houses have lighted house numbers which are actually on 24/7. The builder-installed fixtures are starting to get old and the contacts are wearing out. Per the (pain in the ass) HOA, we can't replace the lighted house numbers, even if we could find ones which look exactly the same. Believe me, we have tried. DH decided to convert them to LEDs and add photocells so they wouldn't be on all damn day. We bought a bunch of supplies and he had to painstakingly MacGuyver the existing fixtures to accept the LED strips. He couldn't get the photocells to work this trip, but he's still thinking about how he can make it happen. Next time we have enough other reasons, we'll make another trip and try again. Even if it's in the middle of freaking hot August.

The $55/day is per tax code.

*Conversely, when I cracked the vacuum's hose on a previous trip, we just ordered a new one and had it shipped to our realtor, who made sure it was in the house before the new tenants moved in.

[sailinlight]

TIL: Never rent out a house with a central vac system.

[Dicey]

TIL: Never rent out a house with a central vac system.

Why? They're pretty awesome. The house in question was built twenty five years ago and it's never even needed service before. I was using the hose pretty aggressively, letting it play all the way out, then yanking on the hose to return it, not even thinking about its age, when it split. The reason the vendors were quoting replacement instead of repair when the motor went out is pure economics. It's easier and puts more in their pockets to replace the whole unit than repair it. Most people don't know any better, so they blindly follow the "expert's" advice. In a relatively upscale Senior resort community where most people have more money than time or ability to do physical labor, it happens all the damn time. This is why we treasure the tradespeople we have good relationships with.

I was just using that as an illustration of why the trip was legitimate business travel, per the IRS.

Here's a better thing to avoid: electric awnings. The same house has some pretty fancy outdoor shades and awnings. In a desert environment, they're nice to have. The one that shades the swanky outdoor kitchen setup broke after we'd owned the house for a couple of years. Apparently those suckers are proprietary, so we couldn't buy just the parts and only one "authorized dealer" could service it. IIRC it cost about $800 to have repaired. That was a bigger ouch.

However, we bought this highly upgraded property for $100k under the original asking price, so we've done okay on it. It's easy to rent, because people love all the upgrades, which didn't really cost us much. And of course we have generous contingency funds for repairs, so it all works out.