An Accountant’s List of Best Real Estate Tax Deductions
webmanager • May 17th, 2023
In today’s post, we’re going to tell you which expenses to watch out for in your daily life as a real estate agent, and what to remember when it comes to tax deductions at tax time.
We get it. As a busy real estate agent, it can be hard to find time (and energy) to get your expenses in order.
Do I need to keep my receipts? What can I write off?
It’s almost impossible to remember every little thing that you spend money on.
However, the work of a real estate agent is filled with tax-deductible expenses, meaning it’s even more critical than other professions to keep track of the expenses you’re incurring.
Whether you’re meeting with clients, hosting an open house, or doing piles of administration work, chances are that you’re doing something in your day-to-day job that can be deducted from your taxes in the future.
In today’s post, we’re going to tell you which expenses to watch out for in your daily life as a real estate agent, and what to remember when it comes to tax deductions at tax time.
Let’s jump in.
This is probably one of the most obvious tax deductions for a real estate agent, but it’s also one of the most important. If you conduct business out of your home (or parts of it), you can take advantage of the home office deduction.
You’ll want to check with your real estate accountant to find out exactly what qualifies as a home office, but typically, you need to have a door in the room, or a section of a room and it should be used solely as an office.
No, working from bed does not count.
Between open houses, private showings, and more, the miles on your vehicle can rack up fast.
When running a real estate business, you can claim part of the vehicle you own to drive back and forth between properties as a business expense.
With the standard auto deduction, every mile you drive for your business can be deducted from your taxes.
If you drive 10,000 miles or more annually for your real estate business, it’s likely you’ll get the greatest tax benefit by taking the standard mileage deduction.
However, if you’re a lower mileage driver or have especially high car payments, the actual cost method may yield a higher deduction.
Between marketing and advertising homes to hosting in-person showings themselves, you use a lot of office supplies and equipment as a real estate agent.
Furniture, fax machines, copiers, computers, and your telephone (and associated bill) can be expensed in full or depreciated over a number of years.
Some real estate agents do business in adjacent cities or even adjacent states.
Therefore, it’s important to remember that renting a car, mileage, flights – these all qualify as a tax deduction.
However, deducting taxes for mileage or travel isn’t as straightforward as other expenses, so this is an area we recommend seeking out your real estate accountant to help.
Just remember, it’s incredibly important to keep track of any rental car or flight receipts when traveling to and from homes for business throughout the year.
As a real estate agent, there are two scenarios in which you can deduct meals as a business expense: when you are traveling on business (as mentioned above) or when you are dining with clients.
In both situations, you can deduct 100% of your total expense in 2021 and 2022, which includes the tax and tip for the meal!
As a real estate agent, the commissions you pay to other agents or employees that work under you are generally fully deductible business expenses.
Pretty great, right? This is a deduction you should not overlook since commissions can add up quickly!
This is another area where we recommend speaking with your accountant to help, as navigating the tax deductions for commissions can become quite complex.
Annual fees are a common cost of doing business and are tax-deductible. In real estate, this means your state license renewal fee, professional memberships, and other fees fall under eligibility for a deduction as well. General business insurance fees? Also included!
How many gifts do you give out during the year as a real estate agent? Most likely, too many to count!
We just hope you’ve been keeping receipts for all of them.
All of the gifts that you’ve given out over the course of the year are deductible up to $25 per gift as long as you follow the IRS guidelines.
You can read more about those here.
Finally, the last expense on our list of tax deductions for real estate agents is the education expense.
Have you taken a course online to boost your earnings or maximize your potential?
As long as the education relates to your current profession, and improves skills that relate to your job, you may be able to deduct registration fees, materials, and certain travel costs.
We may sound like a broken record, but check with your accountant for the nitty-gritty details here!
That wraps up the top 9 tax deductions that you should remember as a real estate agent all year long – not just at tax time.
Having an idea of what’s deductible and not deductible can make it easier down the road when it comes time to compile your expenses at tax time.
If you’re not sure? Keep all of your receipts!
And make sure you have a good bookkeeper to reconcile your books as you go each month. It will make things go much more smoothly when tax time comes around.
If you have a question we didn’t answer or a tax deduction you’re unsure about, feel free to reach out to us here at Basta & Company.
Simply send us a message with your question or book some time in my calendar. We’re always here to help.
Until next time.
Samy Basta brings you more than 20 years experience in tax, financial, and business consulting to his role as founder of Basta & Company. His focus is primarily strategic business planning, empowering clients to set priorities, focus energy and resources, and strengthen operations. In addition, Samy and his firm provide strategic counsel, and technical insight, on a wide range of needs, including tax saving strategies, tax return compliance, as well as choice of entity.
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