Almost everything you buy for your real estate agency is tax deductible, as long as it is ordinary, necessary, and reasonable. The great thing about spending all that money on your real estate agency throughout the year is that the expenses can be subtracted from your taxable income at the end of the year and can really help you out during tax season. So just what is tax deductible when it comes to being a realtor ?
Top 10 Common Tax Deductions from the Real Estate Pros:
- Car Deductions. Undoubtedly the single most commonly claimed tax deduction for all small businesses — but especially for real estate agents. While you can’t deduct your drive to and from the office, all the other driving you do for your real estate business is deductible, like driving clients to see homes or putting up signs. We talked more about how to track mileage and deduct those expenses, here.
- Office Expenses and Supplies. The great thing about real estate is that you’re not stuck behind a desk all day, yet you still have plenty of desk work to keep you busy. Any office supplies you purchase — from post-it notes to printer ink to a new office chair — is tax deductible. To see a full list of small business office deductions, click here. Don’t overlook the big items either, like office rent, utilities, and renter’s insurance. If you work from home, you will claim a home office on your taxes and your deductions may be calculated differently.
- Professional Services. Any fees you pay for consulting, accounting, and legal advice. can be deducted, as long as they are directly related to your business. This includes networking groups.
- Travel. When you go out of town for real estate, you can deduct airfare, taxi rides, train tickets, and other transportation at 100%. You can also deduct hotel/lodging expenses at that rate. However, only 50% of your meals and entertainment can be deducted for business travel, but if your trip is well planned you may be able to squeeze in a little fun while you’re away.
- Insurance. If you have business liability insurance or insurance on your business property, it is tax deductible. If your office is in your home, only a portion of your homeowner’s insurance is deductible. If you are completely self-employed, you can also deduct 100% of your health insurance premiums.
- Meals and Entertainment. Expounding on deduction 4 above, meals and entertainment can be deducted at 50% only if a serious business conversation took place before, during, or after the event.
- Advertising Expenses. Any money you spend to promote your real estate agency is tax deductible. This includes business cards, website creation, website design, website hosting, promotional signs and billboards, balloons, open house costs, promotional events and/or booths, and home demonstrations. Keep close track of advertising expenses; they add up quickly in real estate!
- Computer Software. Any leased or purchase software for your real estate business is tax deductible. Microsoft Office to QuickBooks to Adobe Creative Cloud, as well as software, can be deductible.
- Education Expenses. Any money you spend to further your knowledge or skills in the real estate business is tax deductible. Whether you take an online class, enroll in a college course, take a mandatory certification or CE (real estate continuing education), or subscribe to a real estate magazine, you can deduct the money spent on improving yourself professionally.
- Cell Phone. It’s no surprise that realtors use their phones perhaps more than many other small business owners. They’re constantly connecting with clients, brokers, home owners, home buyers, coworkers, and lenders. Calculate the percentage of time you use your phone for business and use that number to determine the deductible portion of your phone bill. If you have a smart phone, you’re likely using your phone for business even more to research addresses, neighborhoods, and mapping home visits with clients.
Realtors and brokers have hundreds of tax deductions available to them. We’d love to help you with your real estate tax deductions; give us a call today.
Other posts that might interest you:
How to Legally Structure a Real Estate Partnership or Agency
How to Track & Separate Business and Personal Expenses as a Realtor or Real Estate Agent
What You Can and Cannot Deduct for Advertising Your Real Estate Business
Top 4 Tips on Tracking Mileage and Deducting Vehicle Expenses as a Real Estate Agent
6 Ways to Save Time and Money on Bookkeeping and Accounting as a Realtor or Real Estate Agent
How to Calculate Self-Employment Taxes for Real Estate Professionals and Agents
How Do I Figure My Estimated Quarterly Taxes? For Realtors, Real Estate Brokers, and Property Managers
How to Develop an Exit Strategy for Your Real Estate Agency Partnership
How to Develop a Succession Plan for Your Real Estate Partnership