Tax season is here and here are some ways all real estate agents can maximize deductions. Most real estate agents have various expenses and can confidently identify which expenses to use as deductions to help you keep more money in your pocket. Whether you are filing taxes on your own, or if you have an accountant, you need to take advantage of these deductions. No matter where you are in your career, understanding which expenses are allowed will help you to avoid overpaying on your quarterly as well as your year-end taxes.
1. Marketing and Advertising
Marketing and advertising costs such as flyers, business cards, ads, signs, and promos are all deductible. Production costs such as design and writing fees, whether the materials are produced by an agency or part-time hire are also deductible. Online and digital advertising costs include website design, search engine marketing, hosting fees, video production, pay-per-click advertising and any other IT-related costs and are quickly becoming the largest area of spending for real estate agents.
2. Vehicle Mileage or Expense
You spend your days driving between the appointments and properties. How do you determine whether to go with the standard mileage deduction or track all the auto-related expenses? For instance, if you drive 10,000 miles or more per year for your real estate business, it is likely that you’ll get the greatest tax benefit by taking the standard mileage deduction. If you are a lower mileage driver or have especially high car payments, then the actual cost method may yield a higher deduction come tax time.
For those of you who drive over 10K per year, the IRS needs you to keep a detailed log so that you can claim this deduction. Your records should include the time, date, purpose, and mileage of the trip. You can use an app which tracks and records your trips.
3. Home Office Deduction
Do you have a dedicated area of your home for work? If so, you are eligible for a home office deduction even if you also have office space at your broker’s office (unless you are already deducting the desk fees). The home office deduction provides an option: a regular or a simplified method. Many self-employed people find that the simplified method maximizes their deduction. On the other hand, if you reside in a very high-cost region or have a particularly large home office, then the regular method in which you track the actual expense may yield the highest deduction.
4. Office Supplies and Equipments
Whether you are taking the home-office deductions or the desk fees, you can still claim other office-related expenses including the photocopies, stationery, and any other consumables required to run your business. Other huge purchases such as fax machines, furniture, computers, copiers or telephone, and the related bill can be fully expensed or depreciated over a period of years. You can deduct the full expense for a dedicated landline telephone for your business. If you use a cell phone, only then you are eligible to deduct the business percentage of that expense. Keep careful records of all receipts.
5. Desk Fees
Your desk fees are deductible even if you are hanging your license under a national franchise or with an independent broker. However, note that you will not be able to claim the home office deduction if you are taking deduction fees for the brokerage desk fees.
If you are a real estate agent with specific questions on deductions for your business, contact me today at 615-326-TAX9 for a free consultation.
Stephen Wallick started Stephen Wallick & Associates to provide tax and accounting services to Contractors, Real Estate Investors, and Realtors. Steve specializes in IRS Tax Resolution services and works with his clients to resolve cases under scrutiny by the IRS. As a tax professional and enrolled agent, Steve can save you money with IRS loopholes each year. With over 20 years going up against “The Man”, Steve is uniquely qualified to resolve even the toughest IRS cases.