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Top Tax Deductions for Real Estate Agents

Tax Deductions for Real Estate Agents

Tax season isn’t fun for anyone. Typically, it’s filled with more procrastination than actual taxes, and when you run your own business, the urge to spend more time actually building your business instead of taking care of complicated admin can be even stronger. However, as a real estate agent, taking the time to do your taxes correctly can save you thousands of dollars and prevent massive headaches in the long run. 

Tax deductions are complicated and having a good accountant and book-keeper is the best way to make sure your taxes are being done right.  However, there are some things you as a business owner should be aware of. There’s a complete list of rules and regulations on the IRS’ website, but we’ve compiled a list of things to watch out for. Keep this tab open as you go through your checklist or talk to your accountant.

Cars and Trucks

This is one of the biggest ways to save money as a real estate agent. As you know agents end up doing a lot of driving from meeting clients to showing homes. All the driving you do can count towards deductions.

There are two basic ways to deduct car and truck expenses: either by standard mileage rate or by the actual expenses – including maintenance, gas, and depreciation.

For many, mileage is the simplest. If you can track how many miles you drive for your business, you can enter that onto your form at the standard IRS rate. For 2018, that rate is 54 cents per mile.

For business owners, this can be a bit tricky, as accurately delineating your mileage between business and personal use can seem daunting. Luckily, there are several apps that do a great job of tracking your mileage for you. 

If you’re in the market for a new business vehicle, keep in mind additional deductions such as a hybrid versus gas. Electric vehicles are eligible for up to $7,500 federal tax credit. While plug-in hybrid cars may be less.

Commissions Paid

Any commission you pay to other agents or employees can be deducted as a business expense. This is a big one to be aware of because those commissions can add up very quickly. Depending on the size of your company, it could very well be the other biggest expense you deduct. 

Education and Training

Any money spent on education and training beyond the minimum requirements has a potential to be deducted. However, there are some restrictions. 

The minimum needed to operate your business, like training to get a real estate license, can’t be deducted. Nor can you deduct training that is going to qualify you for a different business. The training you deduct has to be directly related to your field. 

Marketing and Advertising

As online advertising is quickly becoming the norm, it’s taking up a larger and larger portion of the marketing budget. Luckily, this is one of the easiest parts of the marketing budget to track. 

However, more traditional marketing and advertising methods, such as staging costs, marketing materials, signs, and photography can all be deducted. Since many of these need to be repeated for each house, they can really add up.

Home Office 

Your home office is where a lot of people get creative with their deductions. Going as far as deducting a portion of their rent or mortgage as a business expense. This can get dicey, however, as you have to prove how you’re coming up with the number, and that the area of you’re home you’re deducting is being only used for business. 

However, where you really get the advantage is with office supplies, office equipment, and software. 

Almost anything for your office qualifies as “office supplies” and can be deducted. If the cost of it is over $1000, then it’s technically “office equipment” and that gets a little trickier because you have to factor in depreciation.  

Meals

Meals used to be one of the loosest parts of tax deductions, with much falling under the “entertainment” umbrella. However, “entertainment” is no longer a valid deduction. 

However, it’s still important to know when you can deduct meals, as those deductions can really add up over the course of a year. If you’re paying for food with a client, investor, or partner, specifically to conduct business, then that’s a valid deduction. Additionally, you can deduct any meals had when travelling for business. You can only deduct 50 percent of the total cost, though.

These are some of the most important deductions you can make on your taxes as a real estate agent. However, it’s not everything. Fees, licensing, and insurance can also be deducted up to a certain point. Gifts given to clients can be deducted, though there are a few restrictions. Desk fees, if you don’t work from home, are also eligible for deductions. However, by tracking the few big categories laid out in this article, you will have a majority of your deductions covered. You’ll be able to get your taxes sorted out quickly and get back to business. 

Article written by Haley Kieser.

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