This week, I’m in the wonderful city of Edmonton.
In my line of work, I don’t get to travel very often. We may travel to attend conferences, but rarely we need to leave the comfort of our own home to visit different cities.
When I get the invitation to speak to a group of real estate professionals at a city that I have never been, I jumped in on the opportunity right away!
Travelling from Pearson International Airport can be hectic at times, especially with kids. But I got to go all by myself this time around!
Uber is awesome! I pre-booked my Uber ride at 4:30 am in the morning. My ride arrived right on time. My Uber driver even gave me tips on how to get an Uber ride home from the airport!
Travelling domestically is great. Line-up is short. Security is tight as usual, but not nearly as busy as travelling to the U.S. Much better experience travelling domestically.
When you don’t travel with kids, you get lots of time! Since I got to work on my blog post for the week while travelling, I’m going to answer the five most asked questions about deducting travel expenses.
1. Can I deduct the travel expense?
In Canada, a taxpayer is allowed to claim reasonable expenses incurred for the purpose of earning business income or property income, subject to a bunch of exception.
The key to determining whether certain travel expense is deductible goes back to this basic principle.
Ask yourself, ‘did I incur the travel expense to earn business income/property income?’
I travelled to Edmonton to speak to a group of real estate professionals in the hope of domestically publicity and generate sales. The primary clientele of my accounting practice is real estate investors & real estate professionals.
My trip is an easy deduction.
2. What if I am going to a family vacation, but stop by to meet a local realtor to check out some properties? I plan to buy a vacation home in the area sometime in the future.
If the primary purpose of your trip is the family vacation, chances are, your trip isn’t deductible.
You can refer to my previous blog post here for an example.
How to prove that the primary purpose of your trip is for business?
Assume I paid for my Edmonton trip, I had email correspondence with the organizer of the event way before I purchased my tickets. Those email correspondences are proof of the primary purpose of my trip.
Majority of my expenses can be deductible.
If you planned your family trip, decided to stop by at a local real estate agent’s office to check out some properties, collected some flyers and information as well as some business cards, as it is difficult to prove to CRA that the primary purpose of your trip is for business. Furthermore, if you’re taking a trip overseas to somewhere like Spain to look at holiday homes, perhaps send some emails to real estate agents to prove your intentions. Sites like villas-plots.com have dozens of potential properties and communicating with the estate agents can prove that you’re primarily going to see those properties.
This means that you cannot deduct most of the travel expenses in this case. So flights aren’t deductible. Accommodation is unlikely deductible.
However, the expenses related to scouting properties and conducting businesses during your travel can still be deductible. If you take a cab to see the properties, cab ride fare is deductible.
If you pay for the meals with your real estate agent, meals are deductible.
Expenses incurred to earn business income are still deductible, just not the entire trip.
3. What are the deductible expenses? If my spouse travels with me, can I deduct my spouse’ travel expense?
If the primary purpose of your trip is related to earning business income or property income, you can deduct your flight, your hotel, your meals, Uber expense and all other related expenses.
Originally, Erwin was supposed to tag along to meet some local real estate investors in Edmonton.
He had to cancel last minute because of our commitment to market Wealth Hacker Conference on Nov 9. (If you haven’t got your tickets, this is the BEST wealth creation conference you can find! Make sure you get the tickets here.)
If he was simply tagging along with no business reason, his flight would not have been deductible.
If we were to bring our kids along, our kids’ flights and accommodation would not have been deductible either.
Meals with family would not have been deductible, as they pertain to personal enjoyment, rather than business purpose.
4. If I decide to extend my trip and stay for a few extra days, how does it affect my deduction?
When it comes to the deductibility of expenses, it always goes back to the same principle mentioned in point #1 above.
Are you extending your trip for business purpose? If so, extra expenses are deductible.
If you’re staying for a few extra days for sightseeing, the extended portion of your trip would not have been deductible.
The best rule of thumb when determine deductibility is to ask yourself the same question, ‘am I incurring the expense for the purpose of earning business income or property income?’
If you still have more questions about travelling, leave a message below. ?
Until next time, happy Canadian Real Estate Investing
Cherry Chan, CPA, CA
Your Real Estate Accountant
P.S. If you have not bought the tickets to Wealth Hacker Conference yet, here’s the link.