We recently started working with a new client who lives in Southern California and owns multiple rental properties in Northern California.
During the initial meeting with our client, she explained how she made frequent trips to Northern California to visit her rental properties and she wanted to claim a deduction for the mileage to and from her home and the rental properties. She informed us that she tracks her mileage using a mileage log and includes the necessary information like dates, mileage and reasons for the trip, such as collecting rent, making repairs or meeting prospective tenants.
Our client’s previous CPA firm had advised her that mileage between her home and the rental property is actually commuting mileage and therefore not deductible.
While this advice is generally correct, our client was glad to hear that there is an exception to treating the mileage as non-deductible personal mileage.
Luckily for our client, at Gedeon Law & CPA, we understand the nuanced tax rules applicable to rental property owners. As we explained to our client, by structuring her rental property investments such that they rise to the level of a business, then our client can utilize a home office, which would then make the trips from her home to the rental properties tax deductible.
In a future article, we’ll discuss how to structure your rental activity as a trade or business activity. Utilizing this structure will not only let you take advantage of deducting mileage but will also allow you to take advantage of additional tax deductions like the home office deduction, Section 179 treatment and deductions for travel to conventions and seminars. Moreover, it will let you take advantage of tax favored Section 1231 treatment that allows you to treat real estate losses as ordinary losses that can offset ordinary income.
Needless to say, after our initial meeting, our client walked away extremely happy knowing she can now claim thousands of dollars in extra tax deductions.
