Most real estate professionals manage their finances themselves, finding the time and energy to organize business expenses can be a daunting task in and of itself. If this sounds like you get the needed help from an accounting professional and focus on running your business. Remember, it’s not recommended to be “penny wise and pound foolish”.
To help you get started on the right footing, we’ve outlined some overlooked tax deductions to help real estate professionals reduce their tax liability and keep more of their hard-earned money in their pockets.
Real Estate Rental Property Losses
Losses on rental properties owned – provided there was material participation as a landlord.
Real Estate Agent Business Expenses
Office-related expenses like photocopies, letterhead, and other products you need to keep your business going.
Other items such as furniture, a new copier, computers, fax machines, or phone systems can either be expensed in full the year they are purchased, or depreciated over a certain number of years.
A dedicated landline used for your business, that expense can also be fully deducted.
You can also deduct the business percentage use of your cell phone bill if you use it for work.
Meals while traveling on business
Are you constantly taking clients out for lunch or hosting dinners to generate referral business?
You’re able to deduct 50% of the total expense.
Note: entertainment expenses are no longer deductible.
Continuing education or other training courses.
You may be eligible to deduct expenses like materials costs, registration fees, and related travel expenses.
Digital and online advertising
Digital and online advertising similar to expenses related to ordinary advertising like marketing materials, signs, photography, and staging are all deductible.
Real Estate – Specific Tax-Deductible Business Expenses
Commissions you’ve paid to employees or other agents are fully deductible as business expenses.
Annual fees are an expected cost of doing business. Other deductible fees include: renewal fees for your state license, the cost of professional memberships, and MLS dues.
Note: Professional fees excluding the amount used for political advocacy & lobbying.
General business insurance and Errors & Omissions (E&O) insurance are fully deductible.
Real Estate Taxes
Deduct real estate taxes that are necessary for your business.
Real Estate Closing Gifts
Real estate closing gifts are tax deductible, as are other gifts given to clients or other business associates, provided that: a) the gifts do not exceed $25 per person, b)incidental cost s do not count towards the $25, e.g. packaging & shipping, c)husband and wife is counted as one person for gift giving purposes.
Each and every mile you drive for your real estate business can be deducted from your taxes.
It’s advisable for agents to get an automatic mileage tracker app.
If you drive over 10,000 miles annually for your real estate business, you’ll likely get the best deduction by using the standard mileage deduction.
However, if you drive less frequently for realty or have a car payment that’s quite high, you might benefit from using the actual cost method to calculate your mileage deduction.
Home Office Deduction
If you use part of your home, you may be able to take advantage of the home office deduction as a real estate tax deduction.
Note: Unless you’re already deducting desk fees you can deduct a portion of expenses like rent or mortgage interest payments, utility bills, insurance costs, internet bills, and costs associated with repairs and maintenance.
Your home office must be used exclusively for business in order to qualify for the deduction
If you exercise your license for an independent broker or a national franchise, your desk fees are fully deductible; just note that you won’t be able to take the home office deduction. Desk fees can constitute a sizable tax write off for realtors.
Any software or app you use to run your business is fully tax deductible, including business and accounting software, lead generation subscription services, CRM software, your Spotify subscription, even your automated mileage tracker.
Keeping your business income and expenses organized doesn’t have to be this complicated. Let’s face it, you cannot do everything by yourself, focus on running your business and get the needed professional accounting help. It’s now tax time, free yourself of lots of stress and sleepless nights.
User | 8/02/2020