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My family of 5 live in California, have a ton of equity in our home, are heavily invested in the stock market through IRAs and other investments and are considering purchasing a rental property in Kauai. The resort comes with on site property management, we understand their fee structures along with many of the other costs outlined already in this community. Super helpful by the way. Based on our analysis, the property would very likely be cash flow positive for us over the duration of the 2nd mortgage but it's a close call and we're getting down to the gnats eyelash in our analysis.

We plan to spend 7-10 days a year at the vacation property. 'We' is my wife, my 3 children and me. That's usually about $4,000 in airfare to get there and back. Can we deduct all of that or just one ticket?

  • Strong piece of advice: If having your family use it on a regular basisis a key element of the plan (ie, if you're thinking the next generation's going to visit it on their own and it'll become a family tradition/inheritance), make sure everyone whom your planning this for has bought into the idea and is willing to commit to that usage. Similarly, if you're thinking you'll retire there, make darned sure you're prepared for the climate and society and so on. That was the plan behind a certain house in Jamaica that I know of, and that's why it wound up being sold. – keshlam Jul 29 '15 at 0:43
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No, you cannot deduct it. There's no business substance in such a trip, it is your vacation, and as such cannot be claimed as an expense against the rental income.

You may be able to deduct the coffee you buy for the meeting with the property manager while there, but there's no way you can justify a 7-10 days vacation with your whole family as an expense to maintain the rental property.

Since you will only have less than 2 weeks personal use, you won't need to prorate expenses, so you have that at least.

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    Going by my experience with other business and charitable travel: If you were spending most of the trip supervising a major renovation or haggling with the rental agent or something like that -- with documentation to prove it -- you might be able to get away with tacking a smaller amount of time as "incidental" side trip. Just visiting the property, with the family, is obviously recreation rather than business travel, especially since you do have the management company there to handle most of the business and maintenance operations. Definite "sounds too good to be true because it ain't." – keshlam Jul 29 '15 at 3:39
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If you and your wife are owners, your tickets might be a business expense against the rental income. 'Might' as in the IRS will be happy to audit you, seeing the kids went as well and prorating the expense as say 25% was really business, the rest, family vacation. If this $4000 write off is the make or break for this deal, don't do it.

  • you cannot "prorate" the trip. Its either business or not. Family vacation is not a business expense. – littleadv Jul 29 '15 at 2:30
  • Citation? Business trips are often extended to add vacation time at the back end. The $4000 won't be allowed, but there's some amount that will be permitted for the owners to go to their rental property. – JTP - Apologise to Monica Jul 29 '15 at 11:16
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    If the trip is mostly business and is extended a day or two - you deduct the whole cost of tickets, you do not prorate. Similarly, if your travel is for vacation and you only spend several hours on business - you cannot deduct the tickets at all, you do not prorate. – littleadv Jul 29 '15 at 15:39

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