Actual Expenses

Many of the costs pertaining to having to travel from home in connection with the rental residences will be reported in this approach. IRS Publication 463, Chapter 5 stipulates precisely how these costs need to be reported and backed up with invoices and receipts. Some software applications can be obtained with iPod, Quick Books, Mint, and others, but you will need to continue to keep a real report to backup your deductions. You have to report this either in your Schedule C or Schedule E together with important forms connected to those. If you’ve got a number of properties, your business expenses must be allotted to the residences in which the expenses were accrued. Only use specifically connected with your rental properties is permissible to write off, so do not include any sort of personal or other kinds of non-property related expenses on these documents.

Mileage Method

Another approach, under which you may write off the actual mileage traveled. As an example, if you drove 1200 miles throughout the year 2012, you could use the present standard mileage rate of $0.55.5 per mile based on existing taxation rates to deduct the total cost incurred.

You’ll need records to back up all use of local transport including auto rentals, metro bus service, and Zip Cars. Of course, all must have been used for transportation directly linked to the property. If using with public transport, it is advisable that you maintain travel stubs. It is a good idea to maintain a separate company account for rental cars and Zip Cars to demonstrate how the use is solely business associated.

• You can obtain the different documents mentioned in this information on the IRS’s webpage. To learn more please check with IRS Publication 527.

Bellevue CPA+John Huddleston has written extensively on tax related subjects of interest to small business owners. He is a graduate of Washington State University and the University of Washington School of Law.