Tax Tips for Real Estate Agents

tax tips for real estate agentsYou may already claim several typical deductions for your real estate business, but the IRS isn’t going to help you out by suggesting what else you might want to deduct. It’s completely up to you and your accountant to make sure every detail is covered and all your deductible expenses are written off properly on your returns.

As a real estate agent, it’s important to keep detailed records of all your day-to-day activities and expenses. That way, when it comes time to pay your estimated taxes or file your annual return in April, you’ll be fully prepared. The IRS allows certain deductions for real estate agents. The more you know, the more you can save on your taxes. And the more you have everything thoroughly documented, the easier it will be to accurately complete your tax return.

We’ve compiled a list of common deductions that real estate professionals can utilize, as well as tips to help you maximize your tax savings.

1.    Auto Expenses

There’s no doubt you spend a lot of time in your car, visiting with potential clients, previewing properties and conducting listing presentations. Because your automobile is such a vital part of your business, there are certain things you can deduct.

Leasing a car is often better for your taxes than buying, but it all depends on your particular situation and expenses. Compare your options and review the financial aspects with your accountant or a company like Community Tax Relief to help you make the right choices for any major business expenses.

Mileage is an important deductible expense that many agents tend to overlook or ignore because it can be tough to track. If you have a good system in place to track your mileage used for work purposes, it can really make a difference come tax time. One recommendation is to get an oil change or have minor maintenance performed right at the beginning of the year. This way, you have third party documentation of your car’s mileage when the year starts.

2. Home Office

Whether you do work from your home or rent a separate office space, there are many personal office deductions that you can take advantage of. It doesn’t matter if you rent or own. In fact, those who rent may even have a bigger advantage because they can deduct a portion of their rent payment.

Some commonly overlooked expenses that can be deducted are:

•   Homeowner’s insurance

•   Utilities (electric, phone, internet)

•  Maintenance/renovations

•   Office supplies/equipment (computer, printer, fax, mobile device/tablet)

•   Property taxes

•   Depreciation of home office equipment

•   HOA fees

As always, review with your accountant and make sure your home office situation or specific expenses conform with IRS guidelines, as well as what percentage of each expense can be deducted. Keep all receipts and records for your home office equipment and utility bills.

3. Keep it in the Family

One thing that not many real estate agents know is that you can actually save money by having your kids (under 18) work for you. We’re not talking about running them ragged because there are limits to what jobs your children can perform, at what ages and for how many hours a day.

There are many technical aspects of working this angle to save on taxes and how you pay your children for their work is also a factor, so always act with caution. Every state’s department of labor will have different guidelines, so be sure and check with your attorney before hiring your kids as part-time assistants.

4. Promotional Expenses

You are running your own business, so many of the costs you are putting into generating customers can be deductible. Here is a list of the most common expenses:

•   Advertising (online, print and direct mail)

•  Closing Gifts

•   Meals and Entertainment

•   Business Travel (seminars, training events, client meetings)

5. Professional Fees

Some of your operating costs will include fees for your attorney or accountant. If you hire an advertising agency to design your marketing materials or a website development company to create/host your website, some of these expenses can also be deductible.

Before you start writing off all your expenses, you will always want to consult with your attorney and/or accountant to see what can be claimed in your particular state and on a federal tax level. In some cases, it’s only a percentage of certain expenses that can be deducted. In other cases, you may not be claiming as much as you could. You never know until you perform your due diligence and make sure all your tax details are covered.

Guest Post by:  Pete Gilliam