Tax Deductions for Real Estate Agents: Maximizing Your Return

Experienced real estate agent ready to calculate tax deductions for real estate agentsDo you feel like you do the work of five people? You spend way more time in the car than the typical commuter. You’re on the go so often that you find yourself eating out most of the time. When you’re at the office, you can never find pens to use, and you’re constantly running to the store to buy your own. And, on top of all that, you’re approaching your license renewal, which means you’ll have to find time for continuing education courses.

Did You Know?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, that means you can deduct expenses like gifts, meals, and entertainment.

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Basic overview of tax deductions

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 questions is yes, then you can most likely deduct that expense.

Common tax deductions for real estate agents

Here’s a breakdown of 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, social media ads, 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 business.
  • 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, determine if you’re ready to do your taxes.

Expense tracking apps

Overwhelmed with receipts? Try these helpful apps for keeping track of your expenses. They will make next year’s tax season significantly less stressful.

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The above content is for general informational purposes only. Taxes and deductions are dependent on your individual circumstances.

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