One of the categories on the IRS Form 1040 Schedule E is for “Auto and Travel” expenses. Here is a quick explanation to understanding this expense category. By tracking and understanding landlord auto and travel expenses, you will increase your expenses and thus lower the taxes you owe.
Do You Have a Home Office?
First, it is important to understand if you have a separate office for your landlording activity or if you work from home. Working from home is more advantageous.
- If you work from home: You can deduct any travel that you make from your home for activities related to your rental properties. In this situation, your home office must be your principal place of business and be where you do administrative tasks. If this is the case, you can deduct trips from your home office to your rental properties and back.
- If you work from an office for your rental activity: Unfortunately, if you have an office where you do your day-to-day rental management, you are limited by the “commuting rule.” Commuting expenses are non-deductible expenses. In general, trips from your office or home to and form your rental properties are not deductible due to this rule. So understanding landlord auto and travel expenses can affect deductibility opportunities.
How Much Can You Expense?
You might think it will take a lot of effort to calculate your automobile and travel expenses. Fortunately, the IRS provides a “standard mileage” rate which is a shortcut to calculating this expense.
With the standard mileage rate, you keep track of the miles that you travel (like trips to Home Depot for rental supplies). Once you have your mileage, you multiply it against the “standard mileage” rate for the year.
You can also do the “actual expense” method. With this method, you track the actual cost of using your car. However, most people do not use the “actual expense” method because it requires more work. You would need to track gas, oil, repairs, and depreciation using your own methodology.
Landlord Auto and Travel Expenses Saves You Money at Tax Time
In conclusion, a lot of landlords do not take the time to track auto and travel expenses. However, tracking it is fairly straightforward. Once you’ve calculated your expense for a trip, you can enter it into free landlord software like RentalIncomeExpense.com so it is stored online and a report can be generated at tax time.