Tax Deductions to be Aware of
Of all the tax tips for real estate agents, being aware of the allowable deductions available to you, and taking full advantage of them, is the best tip you can take. Even minor costs that aren’t critical to your business, but are related to it, can be deducted.
Listed below are some of the most common agent and broker deductions.
- Marketing expenses – Included in these expenses would be open house flyers, website development and maintenance, business cards, and any other promotional materials for yourself and homes you are representing.
- Coaching, training, and educational course costs
- Licencing and renewal fees
- Business operations fees – Included in these fees would be real estate association dues, MLS dues, and brokerage desk fees. A smartphone or computer can also be deducted if you use it for any business related tasks.
- Transportation – Any and all transportation costs associated with your business can be deducted. This would include gas, auto repairs, insurance, parking, airfare, and any lodging needed for business related purposes.
- Home office expenses – A portion of many home expenses can be deduced based on square footage of the office compared to your home. Expenses such as a percentage of your mortgage, utilities, repairs needed, and insurance are all eligible for deductions.
- Gifts – Gifts given to help procure clients, solicit referrals, or maintain a relationship with them in any way can be deducted. Although be cautious with this because only $25 per client, per year, can be deducted.
It is important that you document all your business expenses so you can accurately deduct them on your tax forms. Since you are more than likely considered self-employed, and required to fill out a 1099 at the end of the year, carefully tracking your business expenses is vital in order to obtain the most deductions. Thus allowing you to keep as much of your income as possible every year.
Remember that only real estate business expenses are eligible for deductions. For a general rule all expenses deducted must be: ordinary, necessary, directly related to your business, and for a reasonable amount. To ensure you are following this rule carefully consult IRS Publications 463 and 535, or a real estate tax specialist for more specifics.
