Do you feel like you do the work of 5 people? You spend more time in the car than the stay-at-home mom next door. You’re on the road so often that you never get to eat the leftovers you have in the fridge. When you are at the office you can never find pens to use and you’re constantly running to the store to buy your own (hide them next time). And, on top of all that, you’re approaching your license renewal which requires some continuing education courses that you just don’t have time to study for.
Fortunately for you, as a real estate agent, the above list of nuisances entitles you to some valuable tax deductions. Since the government considers you as a business, regardless of whether you’re an independent or employed real estate agent, it means you can deduct expenses like gifts, meals and entertainment.
A Basic overview of tax deductions for real estate agents
The IRS definition of a deduction can be confusing and when you need to assess expenses and deductions, it can quickly become overwhelming. When pouring through your business receipts, you should consider the requirements that must be met for the expense to count. To determine what an appropriate deduction is, ask these simple questions:
- Does the expense occur on a regular basis in the real estate field?
- Is the expense necessary for running/operating within a real estate business?
- Is it a reasonable expense?
If the answer to the above question is yes, then you can most likely deduct that expense.
Common Tax Deductions for Real Estate Agents
Now let’s breakdown the most common tax deductions for real estate agents and what each entails:
- Auto Expenses: It’s important to record the mileage as it’s often one of the biggest expenses for real estate agents. However, you can also deduct oil changes, car washes, repairs, gas, parking fees and tolls.
- Advertising and promotion: you can deduct any costs you incur when marketing your business. This includes internet listings, radio ads, posters, flyers, etc.
- Gifts: Give holiday or open house presents? If it’s under $25, you can deduct it.
- Office supplies: Yes, the pens are deductible. You can also deduct money spent on postage, which is another big expense for real estate agents.
- Office expenses: Real estate agents who work from home can deduct the cost of some of their utility bills from their tax returns.
- Meals and entertainment: Any meal consumed before, during or immediately after a business-specific meeting can be deducted.
- Dues and subscriptions: If you keep up with Business Week and the Wall Street Journal, you can deduct subscription dues – as long as it’s a publication with content that can help you excel in the real estate market.
- License and permits: Fees involved with obtaining a license, permit, certification and continuing education courses are deductible.
Countless agents miss out on saving each year by not accurately reporting some of the above tax deductions. Now that you’ve gotten a refresher on what tax deductions you may be entitled to (and at the right time), determine if you’re ready to do your taxes.
Overwhelmed with receipts? Try these helpful apps for keeping track of your expenses – they will make next years’ tax season significantly less stressful:
The above content is for general informational purposes only. Taxes and deductions are dependent on your individual circumstances.
Looking to learn more about taxes in real estate? Enroll in our course, Liens, Taxes and Foreclosures.