For busy real estate agents, keeping track of every business expense, and figuring out which expenses are deductible, is probably last on your list of priorities. And it can be especially complicated for independent real estate agents, whose taxes are generally not withheld from commission checks, and who have additional tax liabilities as self-employed individuals.
However, if you’re not tracking and deducting all of your eligible business expenses, you might be significantly lowering your net income.
Below are the top 10 tax deductions that can help real estate agents minimize their tax liability:
- Commissions Paid
Any commissions that you paid to other agents or employees that you work with are generally fully deductible.
- Home Office
If you use your home office as your principal place of conducting business, you may be able to deduct a portion of your home expenses.
- Desk Fees
If you work under a national franchise or for an independent broker, your desk fees are deductible. However, if you take a deduction for desk fees, you will not be able to deduct any home office expenses.
- Office Expenses
Regardless of whether you take a deduction for your home office or for desk fees, you can still deduct other office-related expenses such as stationary, photocopies, and other items needed to run your business.
- Standard Auto
Real estate agents generally do a lot of driving to conduct their business, and these miles can be deducted.
- Marketing & Advertising Expenses
Reasonable advertising expenses that are directly related to your business, including marketing materials, staging, photography, and signage, can all be deducted.
- Education & Training
If you are taking classes or training courses to further your real estate career, you may be able to deduct your registration fees, related materials, and certain travel costs.
- Licenses & Memberships
Your state license renewal, MLS dues, and professional memberships fees (with the exception of the portion of membership dues attributable to lobbying and political advocacy) are all deductible expenses.
- Travel, Entertainment & Meals
When you are traveling for business, or entertaining or dining with clients or other professionals for the purpose of conducting business, you can deduct 50% of your total expenses.
- Client Gifts
Client gifts are deductible, although some stipulations do apply.
By carefully tracking your business expenses, and applying the appropriate tax deductions, you can significantly minimize your tax liability and maximize your net income. If you have questions about tax deductions, leave a comment below, or feel free to contact me directly, I’m happy to help!