By Bob Meyer

You don’t have to make a business trip to get a deduction for your travel expenses. For example, if you are doing volunteer work for a charity, you can claim a charitable deduction when you travel out of town on charity business.

In addition, you may be able to write off your expenses when you take a trip to look after your investments. For instance, a real estate investor who lived in Dallas owned three unimproved lots in Charlotte (NC).

Local ordinances required him to keep the lots clear of trash and underbrush, and he was unable to hire anyone in Charlotte to do the work for him. So twice a year he traveled to Charlotte, did the work himself, and deducted his travel expenses, including meals and lodging.

The IRS said that he wasn’t entitled to a deduction, but the Tax Court disagreed.

The court said that the work was necessary for the maintenance and management of the investment properties. Therefore, the investor was entitled to deduct the cost of doing the work, including the travel expenses.

Note: To deduct your travel expenses, the primary purpose of your trip must be to manage your investments. So, for example, if you take a trip and spend two days on your investments and another week vacationing, you can’t write off the cost of the trip.

In addition, if you are making a trip to buy a new investment—as opposed to managing an existing one—you can’t take an immediate deduction for your travel expenses,

Instead, you must add the travel expenses to your cost basis for the investment. That, of course, reduces your tax when you eventually sell the investment.

This entry was posted on Friday, March 30th, 2007 at 8:31 am and is filed under Entrepreneurs & Small Business, Media & Travel. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.