Client Background: Our firm recently onboarded a new client who possesses a diverse portfolio of both residential and commercial properties located in different states across the country. The client had become disheartened by the fact that the rules regarding claiming travel expenses specifically the “Travel Deduction,” had changed a few years ago, and their previous accountant had not claimed any travel expenses for them in recent years.

Travel Deduction

Given our expertise in investment property taxation, the client turned to us seeking clarification on the possibility of claiming travel expenses for their interstate property visits. They wanted to ascertain whether the information about the ineligibility for such deductions was indeed accurate or if there were avenues for claiming travel expenses related to their property inspections.

The Challenge: The primary challenge in this case was to determine the client’s eligibility for claiming travel expenses in light of the recent changes in tax regulations. It was crucial to understand the specific rules governing travel deductions and whether they applied to both residential and commercial properties or were limited to particular types of properties.

The Analysis: Our team of Tax Experts conducted a thorough analysis of the client’s situation and provided the following insights:

  • We confirmed that the changes in travel expense claims primarily pertained to expenses related to residential rental properties. These changes were not intended to apply to situations involving travel expenses for commercial rental properties.
  • The key reference point for these regulations is Section 26-31 of the tax code, which contains rules restricting travel deductions. However, it was crucial to note that these rules apply exclusively to expenses incurred in gaining or producing assessable income from the use of residential premises as residential accommodation.
  • In our client’s case, where they owned both commercial and residential properties, the travel deductions were still applicable for their commercial properties.

Outcome and Recommendations in case of Travel Deduction

Upon understanding the nuances of the tax regulations, we provided the following recommendations to our client:

  1. Maximize Commercial Property Deductions: We advised our client to continue claiming travel expenses for their commercial properties located in different states, as they remained eligible for such deductions.
  2. Review Previous Tax Returns: We suggested reviewing their previous tax returns to identify any missed opportunities for claiming travel expenses on eligible properties.

Conclusion: This case study illustrates the importance of staying informed about changes in tax regulations, particularly when it comes to claiming deductions for expenses related to property ownership. Our client, who owns a mix of residential and commercial properties across different states, gained clarity on their eligibility for travel deductions, ultimately ensuring they make the most of available tax benefits while complying with the law.

As investment property tax experts, our commitment to providing accurate and up-to-date advice empowers our clients to navigate complex tax matters with confidence, helping them achieve their financial goals while staying compliant with taxation regulations.