Actual Expenses

Within this approach you’d record all costs related to travel from home in connection with the rental property. These kinds of expenses will have to be recorded and backed up with invoices or receipts according to IRS Publication 463, Chapter 5. Although, you must maintain a physical record to support any deductions, there are many software applications obtainable through iPod, Quick Books, Mint, and more which can help you back up your files. You will report all expenses on either a Schedule C or Schedule E along with any corroborating forms. If you own more than one property, your expenses will have to be allocated to the individual residences where the costs were incurred. Only travel costs related to running your rental properties are permitted for deduction, so remember not to  add in any non-business travel costs.

Mileage Method

With this process you write off the cost of your actual miles traveled. For example, if you traveled 1200 miles throughout the year 2012, you would utilize the latest standard mileage taxation rate of $0.55.5 per mile.

Using local transport including Zip Cars, metro bus lines, and vehicle rentals, you will need to illustrate an immediate relationship between the properties and your travel. If using public transport, it is suggested that you maintain records of receipts for all costs incurred and that you allocate all costs to a business account tied directly to your rental property business.

• You can obtain the different documents outlined in this information on the IRS’s webpage. Refer to IRS Publication 527 to find out more.

Seattle 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.