ADVERTISEMENT
If you’ve already received your 1099 from your broker you’re probably ready to start thinking about filing your taxes – which also means you should start thinking about what tax deductions you can claim as a real estate agent.
A lot of agents are often confused about what tax deductions they can take. Many agents make the mistake of not taking enough deductions, which can save you hundreds if not thousands of dollars. At the same time, you’ll want to make sure you’re really eligible for these deductions just in case you were to get audited – so be sure you are clear about what tax deductions you can take, and of course if you have any questions, speaking to your accountant or a tax professional is never a bad idea!
Here are Some Common Tax Deductions for Real Estate Agents:
Advertising Costs: Signs, newspaper advertising, flyers, online advertising, post cards, promotional materials, and anything else that was used to market your business may be deductible.
Professional Fees: Your MLS Board Dues, Realtor Dues, Renewal fees with your state board, Errors & Ommissions Insurance, and any other professional fees you incur may also be deductible.
Education Materials: Did you take continuing ed classes or seminars? Those may be deductible as well.
Car/Driving Expenses: This is an obvious one most agents remember – but many often get confused about how much mileage they can deduct or how to separate “personal” and “business use”. Another confusing thing for many agents is deducting depreciation if you own your car or lease payments if you lease. You can choose to deduct per mile driven or you can also do the actual cost of insurance, gas prices, repairs & maintenance, and other vehicle expenses.
Office Equipment: Office equipment can include desk fees if you have them at your office, computer/software, phone fees (including cell phone), cameras, office supplies, and anything else related to necessities of running your office.
Wages Paid: Did you pay an assistant? Hire someone to help you? Did you pay out any referral fees to other agents? All of these may be deductible as well.
Business Entertainment: You can deduct fees for dinners, event tickets that are business oriented, entertaining for business at home, and anything else related to costs you incurred for entertaining business clients. Be careful with this one – be sure it was really for business before claiming it.
Whether you decide to have your taxes prepared by a tax professional or file online, hopefully these tax deductions for real estate agents will help make filing your taxes easier.
Have any other tips for real estate agents and filing taxes? Share them in the comments below!
12 Comments
Actually, I am thinking right now but thank you for the list at least it narrows down and save me thinking of which is I will consider to claim. Thanks man!
Yes you can deduct some of your entertaining expenses….but only half for example if you take a client to lunch. Pretty sure you can’t deduct the cost of your own meal! Just make sure you keep all of your receipts.
Nice information and timely. I have been lazy myself, and have started not tracking the mileage I drive but take an average. Now I wish I hadn’t done that. Someone told me that once you choose a method you have to stick to that year after year?
I keep an Excel spreadsheet up on my laptop year-round & everytime I make a business expense, I type it in, that way I don’t forget anything & I stay caught up!
Great post! There are a couple items in here I didn’t even think about. Tax time is right around the corner and I think everyone is looking for ways to save a penny these days.
Shannon wrote:
>keep an Excel spreadsheet up on my laptop
I use Quicken to keep track of my business expenses. It is so easy it is almost fun.
Some other expenses;
Parking – did you put money in a meter?
Travel – did you go to a real estate convention?
online services – You have internet service don’t you?
I will have to look through the list before filing to make sure I catch everything. Its interesting how quickly expenses rack up. I try to use one credit card for them all so I won’t forget about any expenses.
Good list of what people can claim as deductions. Many people probably don’t make enough claims as they are allowed to. If you are doing legit business I see nothing wrong with making legit deducations where possible.
My wife just signed on with Zip Realty in Atlanta and she is told that she will be an employee, not a contractor who receives a 1099. How is this possibile?
@John, An employee will get a w2 at the end of the season, whereas a subcontractor or person hired to do the work would get a 1099. Different brokers do different things in the way of commission and tax structure. I am not familiar with the company she is working with to tell you for sure.
I am just starting in real estate and this information is very helpful to me. And the idea of the spread sheet on the laptop i really like.
Thanks for this post. Sounds like most people who responded are pretty on top of it if they update their spreadsheets all year!
I was a financial analyst but now am in real estate and looking to supplement my commission with more steady income. I was compiling all of my expenses in excel, categorizing my accounts by month and looking at where all my money went! The idea struck me that maybe people would pay a fee to have someone keep track of their expenses monthly, organize the data into useful tables and charts, compare actual expenses to what the agent budgeted etc. All they would need to do would be to give me their receipts for the month and I’d do the rest. It could be a great way to manage your business and to have a tidy file all ready for your accountant at the end of the year…or eliminate your need for an accountant if you’re so organized you can do it yourself!
Any thoughts? I’m thinking about asking the agents in my office and maybe a couple others, but curious what someone might pay or if it would be useful at all. Thanks!!