If you own rental properties, you know the frustration: your rental property losses do you no good until you qualify as a tax law–defined real estate professional and materially participate in the properties. Both of these tests turn on hours, and the real estate professional test alone requires 750 hours.
Why Drive Time Matters for Rental Property Losses
Here is a source of hours that many owners overlook: your drive time to and from the rentals.
The IRS says in an old audit guide that travel time should not count. But that guide dates to 2005, states on its face that it may not be cited as a technical position, and rests on a single summary opinion that by law cannot serve as precedent.
And the Tax Court has done the opposite. In the Leyh case, the court allowed the owner’s drive time to her rentals and let the couple deduct a $69,531 loss. In another matter, the IRS relented and allowed the drive time once the taxpayer surfaced her home office.
The Home Office Key to Rental Property Losses
That home office is the key. When your home office qualifies as your principal place of business for the rental activity, trips from home to your properties become business trips. You gain three things: the home-office deduction, vehicle deductions on mileage that would otherwise be non-deductible commuting, and hours toward both participation tests.
One warning: Drive time helps only if you can prove it. Log each trip as you go—date, destination, miles, time, purpose, and which spouse drove. Reconstructed logs invite trouble.
Two More 2026 Rules to Know
Two more 2026 items: Consider electing to treat all your rentals as a single activity, and note that the excess business loss cap is now $256,000 ($512,000 joint) and permanent.
How We Can Help
Sterling Tax and Accounting is here to help your business with tax planning! Our comprehensive approach to tax planning helps reduce your overall tax liability and keep more money in your pocket. If all your accountant does is file your taxes, chances are they are making you pay more than your fair share of taxes.
Learn how to proactively save on taxes by scheduling a call with our tax planning specialists.
Our tax planning, accounting & business services help you stay on track. Sterling Tax & Accounting will work with you to optimize your business and minimize your taxes. We will work to provide you and your business with the tools and resources you need to build a solid tax and business foundation. We’re a trusted CPA Firm in Sarasota, Florida. We serve clients all over the US, and proactively work to minimize their taxes.
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