Actual Expenses

All deductible expenses resulting from travel connected to your residences may be recorded with this method. IRS Publication 463, Chapter 5 identifies the way these expenses should be recorded and supported with invoices. Certain software program apps can be found via iPod, Quick Books, Mint, as well as others which will help you keep track of these records; but you will need touchable documents to support any tax deductions. You are required to report this in your Schedule C or Schedule E along with supporting forms. For people who have two or more rental properties, your expenses need to be allotted to the property where expenses incurred. Remember to not add in any kind of private use or any other use other than that specifically related to the rental property.

Mileage Method

Here you may deduct your actual mileage driven. If you traveled 1200 miles throughout 2012, you’ll apply the latest standard mileage rate of $0.55.5 per mile in accordance with existing tax rates and deduct the total.

You must have documentation to support use of local transport like car rentals, metro bus service, and Zip Cars. To demonstrate the fact that public transit use is only business relevant, it is advised that you keep a record of fare costs. Another good idea is to maintain business accounts tied directly to your rental property for any Zip Cars and car rental expenses you incur.

Quick Note: You can obtain the different documents outlined in this information on the IRS’s webpage. Check with IRS Publication 527 for additional information.

Redmond 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.