Politics & Money

The Complete Tax Deductions Checklist for Real Estate Agents

The-Complete-Tax-Deductions-Checklist-for-Real-Estate-Agents

Just as performing more transactions can increase your income, understanding how to apply your tax deductions as a real estate agent can significantly improve your bottom line.

Agents can claim numerous deductions, including mileage at 67 cents per mile for 2024, home office expenses, and marketing costs. Knowing what deductions you’re entitled to can substantially reduce your taxable income, leaving more money in your pocket.

To help make tax time a little easier, we compiled over 75 of the top deductions real estate agents can use. It’s a good idea to familiarize yourself with this list so you can track your deductible expenses. 

Note: the following is not tax advice and should be considered for educational purposes only. Consider consulting with a qualified tax professional to ensure you’re compliant with tax laws.

Your Tax Status as a Real Estate Agent

First, it’s beneficial to understand how your filing status affects which deductions you can take.

Your tax status plays an essential role in determining your tax obligations and deductions. Most agents are classified as independent contractors rather than employees.

Independent contractors have more control over their work and schedule. You decide when and how to perform your duties, often using your own tools and resources.

This status affects your taxes in several ways:

  • You’re responsible for paying self-employment taxes.
  • You must make quarterly estimated tax payments.
  • You can deduct more business expenses.

As an independent contractor, you receive a 1099-NEC form instead of a W-2. That means no taxes get withheld from your income.

You need to pay self-employment tax, which covers Social Security and Medicare. The good news is you can deduct half of this tax on your return.

Keep detailed records of your income and expenses. Proper recordkeeping can help you maximize deductions and accurately report your earnings.

Remember, your specific situation may vary. Consulting a tax professional is always wise and can ensure you comply with all relevant tax laws and regulations.

Real Estate Agent Tax Deduction Checklist (Free Download)

To help you stay organized and benefit from your potential deductions, we created a comprehensive checklist.

Here’s a list of common tax deductions you should consider, along with some you may not have thought of:

  1. Home office rent or pro rata mortgage interest 
  2. Internet used for your home office 
  3. Home office utilities (electricity, water, gas) 
  4. Depreciation of your home office space 
  5. Office furniture (desks, chairs, etc.) 
  6. Office equipment (computers, printers, monitors) 
  7. Office supplies (pens, paper, toner) 
  8. Office decoration (plants, pictures, etc.)
  9. Cleaning services for your work area
  10. Pest control treatment for your home office space 
  11. Mobile phone and service plan used for business 
  12. Landline expenses, if used exclusively for work 
  13. Vehicle mileage driven for business purposes 
  14. Vehicle insurance for work-related use 
  15. Car maintenance and repairs linked to your business 
  16. Parking fees for client meetings or showings 
  17. Tolls incurred during business travel 
  18. Vehicle loan interest (for business use) 
  19. Cost of wraps or decals for vehicle branding 
  20. Marketing on social media platforms 
  21. Online advertising for property listings 
  22. Flyers, postcards, and brochures 
  23. Custom business cards 
  24. Professional photography for property listings 
  25. Drone videography for showings 
  26. Website creation and hosting expenses 
  27. Fees for maintaining a customer relationship management (CRM) program 
  28. Lead generation subscription services 
  29. Search engine optimization (SEO) services for your website 
  30. Property staging expenses for showings 
  31. Signage for open houses and listings 
  32. Subscription costs for market analysis tools 
  33. Real estate license renewal fees 
  34. Professional association dues (e.g., local realtor boards) 
  35. Continuing education to maintain your license 
  36. Workshop or seminar entry fees 
  37. Travel for conferences (airfare, lodging, etc.) 
  38. Business-related meals (50% deductible) 
  39. Costs of hosting client parties/events 
  40. Gifts to clients (note that there may be annual limits) 
  41. Custom-branded promotional products 
  42. Errors and omissions (E&O) insurance premiums 
  43. General liability insurance for your business 
  44. Legal fees for contracts and consultations 
  45. Tax preparation or CPA services 
  46. Financial advisor or consultancy costs 
  47. Referral fees paid to other agents 
  48. Bank fees on business accounts
  49. Credit card interest payments (for business purchases)
  50. Work attire featuring your company logo 
  51. Dry cleaning of work-related branded clothing 
  52. Rental costs for office spaces or co-working desks 
  53. Software licenses for business applications 
  54. Cloud storage for business files 
  55. Video conferencing subscriptions 
  56. Maintenance services for office equipment 
  57. Postage for sending client documents 
  58. Courier services for urgent deliveries 
  59. Printing of property brochures or banners
  60. Personal assistant expenses (used for your business) 
  61. Virtual assistant expenses 
  62. Standard subscriptions (e.g., real estate industry magazines) 
  63. Assistant or employee salaries (if applicable) 
  64. Health insurance premiums 
  65. Contributions to retirement accounts 
  66. Workers’ compensation insurance 
  67. Payroll service costs 
  68. Repairs or upgrades to business technology 
  69. Fees for background or credit checks for tenants 
  70. Costs of sponsoring local events for promotion 
  71. Rental fees for specialty tools (e.g., drones) 
  72. File storage charges or document archiving services 
  73. Fees for answering services 
  74. Costs for rented staging materials 
  75. Moving costs for office relocation 
  76. Small appreciation gifts for suppliers or colleagues 
  77. Open house hosting costs (light refreshments, etc.) 
  78. Expenses for gaining additional certifications or designations 

Remember to keep detailed records and receipts for all your expenses. That can help substantiate your deductions if the IRS ever audits you.

You can download our free tax deduction checklist to ensure you don’t miss out on any expenses during the year. You can customize it to help you stay organized and maximize your deductions at tax time.

How to File Your Taxes as a Real Estate Agent

As a real estate agent, you’re usually considered self-employed for tax purposes. As a result, you need to file your taxes differently than traditional employees.

You’ll use Form 1040 to report your income and pay taxes. This form is the standard individual income tax return used by most taxpayers.

In addition to Form 1040, you need to complete Schedule C. This form is used to report your business income and expenses. It’s crucial for calculating your net profit or loss from your real estate activities.

Keep detailed records of all your income and expenses throughout the year. That includes commissions, fees, and any other money earned from your real estate work.

Track your business expenses carefully, including:

  • Mileage (67 cents per mile for 2024)
  • Marketing costs
  • Office supplies
  • Continuing education

You also need to pay estimated taxes quarterly as a self-employed individual. The due dates are typically:

  • April 15
  • June 15
  • September 15
  • January 15 of the following year

Consider using accounting software or hiring a tax professional to help manage your finances and file taxes accurately. These options can save you time and potentially reduce your tax liability.

Common Tax Planning Mistakes to Avoid

If you file your own taxes, be aware of a few costly errors that real estate agents often make.  Here are some pitfalls you want to avoid:

  • Combining personal and business expenses: Keep your finances separate. Use dedicated credit cards and bank accounts for your real estate activities.
  • Poor recordkeeping: Maintain detailed documentation of all your business expenses. Organize receipts, invoices, and mileage logs throughout the year.
  • Missing out on deductions: Familiarize yourself with eligible tax deductions for real estate agents. These may include marketing costs, home office expenses, office supplies, license renewal fees, and continuing education.
  • Exaggerating expense claims: While you want to claim all legitimate deductions, inflating your expenses can raise red flags with the IRS. Be honest and accurate in your reporting.
  • Neglecting estimated tax payments: As an independent contractor, you’re responsible for paying taxes quarterly. Failing to do so can result in penalties.

Ignoring tax code changes: Stay informed about updates to tax laws that may affect your filing. Consider consulting with a tax professional who specializes in real estate.

Most Popular Articles

Real estate tech profile: Growing a business with Scout 

Becoming the mayor of your geo-farming neighborhood has, for a long time, been conducted in very much the same way — with door-knocking, direct mail and luck. Technology has started making inroads to opening conversations, but there was still a gap filled mostly with just-listed and just-sold postcards. Truly being able to reach the consumer […]

Nov 26, 2024 By

Latest Articles

When will you stop juggling taxes, bookkeeping, and payroll? 

As a real estate professional, do you feel like you’re perpetually playing catchup with taxes and budgeting? Troy Palmquist offers 3 fintech solutions that can change the state of your finances. Real estate agents love to trot out the talking point that they “help clients manage the buying and selling of their most valuable asset.” […]

Dec 02, 2024 By