Tax Deductions for Real Estate Agents

Right- only donations to qualified charitable organizations are deductible. However, you ( self employed) can deduct 100% of all ordinary and necessary business expenses on Sch C. This would include any fees that are "ordinary and necessary" such as the fees you refer to. FYI- this does not apply to Meals & Entertainment- although deductible if business related, these expenses are limited to 50% of actual expense. So, a 20 dollar lunch with a potential client is limited to 10 dollars.

ccbdiver

Hi ccbdiver: You can deduct the RE/MAX portion of the split if it is included in your 1099. Posts below are correct. They should be issuing the 1099 net of their share in which case you cannot deduct it otherwise you would effectively get the deduction twice.

Well yes, you are correct, you should be receiving a 1099 from your broker on your net commission paid out for the year - not inclusive of the broker's percentage. The deductions would apply to that net amount.

Could someone answer this question, it is my question too.

Well - how are you paying for your expenses at this point? You need to talk to your tax advisor:
someone should be able to write it off - are you married, dependent...?

any losses can be carried over to a profitable year, 3 years in Canada.

Any expenses you have can be deducted in the year you have them. They can be carried forward to the next year.

Hi Faye, The general rule is that you should be generating revenue which identifies the time as which you begin to take expense deductions. With a real estate professional I have interpreted this rule to mean when they become active. That is after they get licensed and begin spending a significant amount of time in your business. If this is a part time venture forget about deducted expenses until you have a sale.

You certainly can. Once you become a real estate agent under a broker, you are holding yourself out to conduct business and considered to be engaged in business activity for profit- expecting to make a net profit ( not a hobby). If you incur expenses but have no sales, you have a loss on Sch C which will go on front of your 1040 tax return. You-the real estate agent- DO NOT HAVE to match expenses against revenue ( matching principle of accounting- in other words, you don't have to wait for income to match against expenses you have incurred. Also, it doesn't matter how much time you spend in your real estate business- this doesn't determine when and if you can deduct expenses. This applies to passive activities- your real estate activity is not passive. Example of passive activity is rental property-and even then, for real estate agents, there are exceptions to passive activity rules. Here is bottom line, you can deduct all expenses incurred in your real estate business that the IRS considers Ordinary and Necessary -and reasonable- to your business ( i.e- a Rolls Royce is not reasonable although it is a car, and a car is ordinary and necessary for your business).

I will say this- regarding your status as a new agent- you may want to stay clear of the cost you incurred prior to becoming an licensed agent. These expenses are more likely to be considered start-up costs and not all deductible in your first year. Start-up costs are expenses and cost of getting the business ready for business.Read for business is the day you are able to work with a client. Think of it like this- if you were building a McDonalds, you are in business the day you open your doors to customers. So, I take this as the day you sign on with a broker.

One last caveat- you loss can be applied to another tax year. This is tricky and you need to consult with tax advisor for help. In a nutshell, you typically can carry the Sch C loss back 2 years ( amended returns), and then forward for 20 years until it is totally used up against income. You can elect to carry the loss forward - and not back 2 years- but this must be done ( elected) at the time the tax return is filed timely by making the election and attaching to 1040 tax return. The loss is put on the front of 1040 under Other Income ( with explanation reference worksheet to show nature of loss.

Sorry for wordy response- I saw several replies that were somewhat misleading and didn't want you miss-out on your tax return.

no the 30% is not tax deductable. This is the "fee" you pay to be associated with the broker. The only thing/s you can use as deductions are what your broker charges you i.e for using their office,...

The 30% paid to broker is not deductable, because that is not yours or paid to you. Only thing that your have to account for are checks writen to your name. Deduct from there.

I think this is a good idea, but the only difficulty I see with it is it takes time on behalf of the realtor to give you the documents and info. Also, you'd have to charge less than an accountant or bookkeeper to make it worthwhile otherwise a realtor would simply have their accountant or bookkeeper do it.

Peter Lawlor

Blog: <a href="http://www.websitetemplatereviews.com/realtor-wordpress-theme-wp-for-real-estate-agentpress">B2Web</a>

Sorry about the link mess. I've never used this comment system and wasn't sure how to put my info in and then I figured out how to register at livefyre.

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.

They will take taxes out of her commission check so she won't have to pay quarterly

Employees receive w2's, Independents recieve 1099's I would not listen to the person that said you will be a employee. Enless you are the the Secertary or bookkeeper. You might have floor duty, or require to be at weekly office meeing. Good luck with your new company.