It’s definitely time to get your tax information together if you’ve not already done so. And yes, I can hear your groans from here.
Here we go with a cursory list of deductions specific to real estate agents/brokers. For a detailed list of tax deductions, refer to IRS Publication 535. AND ALWAYS consult with a tax professional before you file anything with the IRS.
And yes, it is also more than time to check with your tax professional about new provisions for self employed workers. There may be ways for you to save if your business is structured to save according to the 2017 Tax Act.
- Commissions Paid
- Commissions you have paid to other agents and employees are generally fully deductible business expenses.
- Home Office- Your home office must be used exclusively for business in order for it to be deductible. If you “share” your home office with other functions in your house, such as sleeping or eating, you can fractionally deduct the portion of the space used exclusively for work.
- If you deduct “desk fees” with your broker, you cannot also deduct home office expenses.
- Desk Fees
- Desk fees you pay to a brokerage are fully deductible.
- Again, it’s either one or the other…desk fees or home office…not both.
- Education and Training
- Registration fees and related materials for education and training courses are deductible.
- The education and training must either maintain or improve your skills related to your real estate business.
- The education and training cannot qualify you for a different business or trade.
- The education and training cannot be for the purpose of meeting minimum educational requirements for your real estate license requirements.
- Marketing and Advertising Expenses
- Marketing materials, signage, staging, photography, ads, etc.
- This one of the best deductions for real estate professionals.
- Standard Auto Expenses
- Every mile you drive for appointments, showings, open houses, etc. is deductible.
- If you drive 10,000 miles and above/year for business, chances are you’ll get the greatest tax benefit by taking the standard mileage deduction.
- If you drive less than 10,000 miles/year for your real estate business of you have particularly high car payments, the actual cost method may yield you a greater deduction.
- Make sure to have clear, organized and specific mileage records to verify your deduction claim.
- Office Supplies and Equipment
- Stationary, photocopies, a dedicated landline for business are all fully deductible.
- For cell phones, you are able to deduct the business percentage of the overall cell phone expense.
- Larger equipment purchases such as computers, furniture, copiers, etc. that can be expensed in full or depreciated over a number of years are deductible.
- Keep all expense receipts.
- Meals and Entertainment
- When traveling for business and/or dining with clients and/or other professionals while conducting business or generating referrals, 50% of expenses plus tax and tip can be deductible,
- For events such as open houses where the general public is invited to attend, the cost of food and beverages is fully deductible.
- Keep all receipts.
- Fees, Licenses, Memberships, Insurance
- License renewals, MLS dues, professional memberships (except the portion used for lobbying and political advocacy) are all fully deductible.
- Business insurance and Errors and Omissions are fully deductible.
- Your real estate taxes necessary for your business, but not your self-employment taxes, are fully deductible.
- Keep all expense receipts.
- Software and Business Tools
- Your needed business software, CRM software and lead generation subscription services are all fully deductible.
- Products that help you automatically track and itemize your mileage and expenses are all fully deductible.
- Business gifts of no more than $25. Are deductible. Incidental costs for shipping, engraving, etc. are not deductible.
- If both you and your spouse gift the same person, the two of you are treated as one taxpayer.
- Keep records of the business purpose of all gifts and the amount spent.
AND, again, pull your information together AND consult with a tax professional!