Learning to maximize your deductions as a realtor is the smartest way to keep your costs down. There are a lot of expenses associated with being a realtor or a real estate broker, and being able to identify those deductions helps keep money in your pocket when filing and paying taxes.
It’s always important to arm yourself with the knowledge of which deductions are available to you as a realtor. While many are easy enough to identify, some might surprise you! Here are the 10 most common realtor deductions. (Read to the end for a free downloadable tax organizer!)
1. Vehicle Mileage
As a real estate agent or broker, you spend a lot of time driving between appointments. When it comes to deducting vehicle mileage, you have two options. First, you can opt for the standard mileage deduction. This deduction is usually best for those who drive 10,000 miles or more each year specifically for real estate business.
The second option is to deduct the actual cost of your mileage. It’s better to deduct the actual cost if you have high car payments or you have a lower mileage to report. In both cases, it’s important you keep an accurate log of your mileage per year as well as the purpose of each trip.
2. Home Office Deduction
You can deduct the costs of running a home office only if it is your primary office, which means you spend a majority of your work week at that office, and if you have an area of your home which is exclusively used for business purposes only. That means never using any part of your home office for personal use.
3. Marketing Fees
If you want to be successful as a real estate agent or broker, you’ll likely need to spend some money on marketing and advertising to attract potential homebuyers and home sellers. Things like business cards, online ads, promotions, and flyers are all deductible. You are even able to deduct the cost of production for these materials.
4. Office Related Expenses
If you spend $500 or more on any one specific item such as a tablet, cellular phone, camera, computer, etc., make note of the specific description, purchase price, and purchase date in order to get a deduction. Other items that were under $500 can just be added together and listed as one annual total.
5. Phone Expenses
Whether you use your home landline or a cell phone for your business related calls, you are eligible to deduct a portion of the cost for your business. Keep an accurate record of the percentage of calls used strictly for business purposes so you’re able to calculate the total write- off amount.
6. Professional Development
As a business owner in the modern age, you always need to remain aware of the latest trends and ideas. Professional development is a great way to gain an edge in your business, and the costs of these educational classes, shows, or conferences are all deductible. The cost of traveling to these events might also be deductible, depending on the situation.
7. Meals and Entertainment
If you are traveling specifically for business or dining with clients with the sole purpose of conducting business, these costs can be deducted up to 50% of the total expense. If you are providing food or entertainment in a publicly advertised open-house, on the other hand, these costs can be deducted in totality. Always keep receipts and proof of purchase in these instances to ensure accurate recordkeeping.
8. Real Estate Fees
Many states require annual licensing fees or insurance. In general, these fees are tax-deductible. Membership fees for local or state associations are also deductible in many instances up to a certain percentage.
9. Business Gifts
Business gifts are often a great way to build relationships with clients, and they can also cut down your total tax bill. During a tax year, you are allowed up to $25 in business gifts per recipient as a deductible expense.
10. Subscriptions to Professional Journals or Publications
One of the lesser-known deductions available to real estate agents or brokers are the subscriptions to any professional material. Journals and real estate publications are a great way to stay on top of the latest industry trends, and the IRS recognizes the value of these subscriptions for professional development.
Download our free tax guide and organizer!
To make the confusing tax process a little bit easier, we’ve developed a tax guide and organizer specifically for real estate agents, brokers, and salespersons. This will walk you through the things you need to know to stay organized!
The Importance of Realtor Deductions
When you’re filing as self-employed, it’s more important than ever to be aware of all possible deductions related to your business. If you’re not sure whether or not an expense qualifies as a deduction, ask yourself if the expense is ordinary, necessary, directly related to your business, and reasonable in amount. If you follow these general guidelines, you shouldn’t encounter any issues when tax season comes once again.
If you need assistance filing your deductions accurately, utilize the assistance of a qualified tax advisor who can direct you in the best filing method for your business.