Tax Tips for Real Estate Agents

real estate agent tax tips

Tax Tips for Real Estate Agents

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It’s everyone’s favorite time of year – tax season. As people prepare their W-2s and dread that April 17th deadline, real estate agents can approach this time of year with a spring in their step. With special deductions to save them money, agents can use these tips to get the most out of their tax return.

  1. Mileage
    As a real estate agent, you probably spend a lot of your time driving to and from properties. Wouldn’t it be great if you could get something in return for all of that? Well, you can. If your use your own vehicle for anything business related, those costs incurred are considered deductible. There are two ways to calculate these expenses: by applying a standard per-mile rate, or by figuring out the exact percentage of mileage that was used for business purposes and applying it to the price of gas, insurance, repairs, etc. You can find more information about both methods on the IRS website.
  2. Marketing and Advertising
    It wouldn’t be far fetched to say that a great number of real estate agents advertise their services to reach a variety of new clients. Whatever methods of advertising you use, whether you rent billboards, hand out promotion material, or a combination of both, you can deduct those costs from your taxable income. To make the most of this deduction, use a checklist to make sure you’re subtracting all possible costs.
  3. Home Office
    While some real estate agents work out of an office, some prefer to work from home. If you have a section of your home that you have dedicated an “office” to do any work pertaining to your real estate responsibilities, you can claim a deduction for that space. The amount of the deduction depends on what percentage of your house you’ve dedicated to your office; while it may be a small amount if your work space is on the tinier side, every little bit counts.
  4. Desk Fees
    If you rent office space, you can write off that cost on your taxes. Be sure to keep track of these payments throughout the year, whether you pay them monthly, quarterly, etc. This, however, prevents you from claiming the home office deduction.
  5. Office Supplies and Equipment
    In order to successfully operate and maintain a business, you’re going to need supplies. You can claim smaller supplies like paper and post-it notes, as well as bigger items like furniture. Those bigger items can either be claimed in full, or depreciated over a certain number of years. Consult your accountant to find out which method is better for you.
  6. Meals and Entertainment
    As nice as it would be if this meant taking the family out for dinner and a movie, it’s referring to any entertainment costs that may come as a result of doing business. Offering a potential client theatre tickets or taking them out to dinner would fall under this category, or essentially any likewise expenses that occur during business dealings.
  7. Travel
    Occasionally you have to travel for work, especially if you have clients in another state. The costs of traveling are deductible, but be sure to stick to strictly business-related expenses. As nice as it would be to deduct the cost of your family trip to Disney World, that action may lead to the IRS knocking at your door.
  8. Professional Development
    With an industry that is always changing and evolving, sometimes you need an update on your education to stay in the loop. If you go to conventions or any kinds of classes, those fees can be deducted from your tax return. Any travel to conventions can also be deducted.
  9. Software and Business Tools
    As a real estate agent, you may use some sort of software to conduct your business. This, and other business tools such as hired consultants, can be deducted. Most tools that help you run your business qualify for this write off, but be sure to check with the IRS for any exceptions.
  10. Fees, Licenses, Memberships, and Insurance
    Any annual fees you may have, such as license renewals, memberships, or NAR dues, are deductible. Additionally, you can deduct the cost of insurance premiums and real estate taxes. While certain exceptions apply, most fees like this are considered costs of doing business and can be written off.

One trick to having a successful Tax Day is to make sure you’re organized. Keep all the necessary receipts, and detailed records of expenses. Having this information kept neat and all in the same place will make it that much easier to claim all your deductions, and get the most out of your tax return. Consulting an accountant can help ensure that you file everything correctly, and avoid any unnecessary trouble with the IRS.

Which Deduction(s) are You Most Excited About?

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ApplyConnect marks used herein are trademarks or registered trademarks of applyconnect.com. Other product and company names mentioned herein are the property of their respective owners.