Your Guide to Real Estate Agent Tax Deductions
As a real estate agent, you can save hundreds (even thousands!) of dollars at tax time by deducting business expenses. That’s because every time you write off an expense, you lower your taxable income, putting the money you spend on your business back in your pocket.
Read on to discover the most common realtor tax deductions.
A Few Things to Keep in Mind
When it comes to deducting business expenses, as a realtor there are certain regulations you need to follow:
Business expenses must be both ordinary (commonly accepted in your trade) and necessary (helpful and appropriate for your business). The expenses we list below fall into this category.
The IRS requires documentation of any business expense you deduct. That’s why it’s so important to track your expenses during the year. If you didn’t track your expenses last year, don’t worry; our guide shows you how to retroactively find deductible expenses.
Because there’s always a chance you may be audited, save your business receipts for at least three years after you file your taxes.
Realtor Tax Deductions
If work in real estate, here are 16 common real estate agent tax deductions you should keep track of throughout the year:
1. Mileage: Keep track of all your business-related trips. While there are lots of ways to do this (like taking odometer readings before and after trips), the easiest way is to use an app like Stride that records mileage while you drive:
Between your home office and a property showing or client meeting
Between showings or from your last showing back to your home office
On work-related errands, like picking up work supplies, conducting a property inspection, obtaining a building permit, or attending a conference
If you choose to take the standard mileage deduction, keep in mind that you cannot deduct individual vehicle expenses like gas, oil changes, car repairs, and car insurance.
2. Home office: The IRS keeps a close eye on this deduction, so make sure you only write off your office if it’s a dedicated home workspace used solely and regularly for your real estate business.
Have a home office? You can write it off with either:
The simplified option: Multiply the square footage of your office (up to 300 square feet) by the standard rate of $5.
The actual expense method: Add up the expenditures related to your home office, including:
Direct expenses, such as supplies for and repairs to your office. You can deduct these in full.
Indirect expenses, like your mortgage, insurance, and utilities. You’ll divide the total cost of these expenses by the percentage of your home that’s used for business.
3. Desk fees: If your broker charges you a desk fee, you can deduct the cost as a business expense. Because these fees are for an office space, you cannot claim both desk fees and the home office deduction.
4. Real estate software and apps: If you subscribe to any online tools for your real estate business, be sure to keep your receipts — these expenses are deductible.
5. Cell phone bills: Do you use your phone exclusively for business? You can fully deduct related expenses (including the phone purchase and monthly bills). If you also use your phone for personal reasons, you should only deduct the portion used for business. The best way to do this is to calculate what percentage of your calls were work-related and then claim that percentage of your bill.
6. Business cards: Designing and printing business cards is a deductible marketing expense.
7. Printing and copying: Keep your receipt anytime you print or copy work-related materials like marketing flyers, brochures, and office records. Print jobs are deductible.
8. Office supplies: Items that you buy for everyday office use, like pens, paper, postage, and notepads, are all deductible. Good news: You can still write these off even if you take the simplified home office deduction.
9. Advertising: When you invest in promoting your business, keep track of how much you spend. Online ads, signs, print ads, radio ads, postcards, and more are all deductible.
10. Promotional goodies: Do you give away goodies like branded pens and stress balls to promote your business? You can deduct these, too.
11. Parking: Anytime you have to pay for parking while you’re working, save your receipts; these expenses are deductible. Unfortunately, this doesn’t apply to parking tickets or traffic violations, so drive safely.
12. Tolls: Any toll fees you pay while working are tax deductible as long as they’re not already being reimbursed.
13. Professional development: When you invest in networking and educational opportunities like conferences, seminars, and professional events, you can deduct related sign-up fees and reading materials. You can even deduct travel and lodging expenses if you travel to a convention or conference. Meals are deductible when you’re away for business, but only up to 50 percent.
14. Licenses and memberships: You can deduct any license renewal fees or membership dues to professional organizations (like the National Association of Realtors) that help you do your job. The portion of your dues that goes to political lobbying is not deductible.
15. Client gifts: If you send gifts to your clients after closing a deal, you can write off the expense up to $25.
16. Health insurance: As long as you don’t get health insurance via a spouse or employer, you can deduct 100 percent of monthly premiums you pay. Keep in mind that if you receive a government subsidy, you can only write off the amount you pay each month (not the original price of your plan). Note: your health insurance premiums are taken as a personal deduction on Form 1040, NOT deducted as a business expense.
Some Common Expenses You Can’t Deduct
The IRS deems some common expenses as non-deductible. These include:
Personal hygiene expenses, like haircuts, clothing that can be reasonably worn outside of work, and dry cleaning (unless it’s for a uniform)
Legal violation fees, like parking tickets or court fees
Commuting mileage if you work at a permanent office away from home
Life insurance premiums when you are the beneficiary, even if you take the policy out to secure a business loan
An Easy Way to Track Your Realtor Tax Deductions
Have you tried our free expense tracker?
Stride is an app that makes it simpler than ever to find deductible expenses, take pictures of receipts, and automatically record business mileage.
