As the year continues, so do the deductions for real estate professionals. We have compiled a list of the most common deductibles that real estate professionals miss out on for their annual deductions. Make this year the year that you take control of your taxes!
Business Administrative Expenses
These expenses can be for the office or business expenses in general.
- Postage – Sending out flyers, newsletters, work related documents
- Signs – This can be the advertisement on your building.
- Office Supplies – Pens, paper, computer screens, etc.
- Payroll Software
- Snacks, water – This can be the snacks that you provide for the office and guests of the office.
- Business Cards
- Keys for the office – Each new employee will need a new key
- Lockboxes – This can add up when you are showing many different locations at once.
- Bank charges - As long as they are connected to your work they are a deduction for real estate
- Hard Drives – A good practice is backing up all your and your clients' data.
- Work Computer
- Photos / Film – This can include the camera that you purchase for taking all the staging photos of your locations.
- CPA / Tax – This can be consulting or the software you purchase for tax purposes.
Sales / Communication Expenses
As a Real Estate Professional, you have to make yourself as “discoverable” as possible nowadays. Your online presence is just as important as your offline. So, make sure that you are allotting enough money to build a great online presence as well as resources for your customers to hand out to others (offline presence).
- Email Clients – For sending all the
- Phone Bill – Many times a large portion of your phone usage is for business and those are a very common deduction.
- Website – Building your online presence can be expensive but this can be expensed so you get the most for your investment.
- Marketing / Advertising – All the printing of flyers and business cards. Advertising on Google AdWords or yelp.
- Long Distance Charges – Many of your listings can be abroad and this can get very expensive.
- Consulting Firms – Bringing in a consulting group for marketing or sales can be very helpful as well as a deduction.
- Client Gifts (up to $25)
- Online listings Services – Many sites like realtor.com, redfin.com charge for posting locations.
- Staging – Snacks, water, flyers to hand out, etc.
- Client Lunches
Travel Expenses and deductions for real estate professionals
This expense category is one of the most overlooked categories. Did you know that every 1,000 miles are worth $535 in deductions for real estate? It can add up very quickly so make sure you are using tools like Everlance to track every mile. You can read more about Standard v Actual Deductions here.Actual Expense Method Deductions :
- Oil changes
- Garage rent for car storage
- New tires
- Mechanical/cosmetic repairs
- Depreciation – This is subject to annual luxury auto limits and your depreciation method may differ depending on the business use percentage.
- Lease payments
- Licenses – Items such as your driver’s license (allocated) or 100% of your private hire vehicle license.
- Insurance – Deduct a portion of your regular insurance or 100% of your ride-sharing insurance.
- Vehicle registration fees – Examples include inspection fees, license plate fees, and other state registration fees.
Standard Mileage Deductions:
- Driving to destination area – Driving to different residential or commercial locations can be a deduction.
- Return trip mileage – Follows the same logic as driving to the destination area.
- Making a trip to the gas station - Potential deductions for real estate professionals
- Making a trip to the store to get supplies – This can be the trip to get the staging supplies or pick up photos for an event.Industry Expenses
There are many expenses that are industry specific to Real Estate Professionals. It is important to do your research beforehand to know what fees can and cannot be deducted per year.
- Legal – Having a great legal counsel can be very helpful and needed for closing escrow.
- Insurance – It’s important to get the best insurance, whether it be a car, health or home insurance. Percentage of this can be deducted.
- Licenses – This can be anything from your annual renewal real estate fee
- Real Estate Fees – Many realtors have association fees per year
- Seminars – Great place for learning and keeping up with the newest trends. Also, a great place to network
- Regional Fees – This can be fees that are attributed to clubs or groups you are part of.
Home Office Expenses
More and more Real Estate Professionals are working from home. This can be a big added bonus for deductions.
- Power – The amount of electricity that is used by your business
- Gas – See power
- Water – See power
- Waste – See power
- Alarm System
- HOA Fees – A portion of your HOA fees can be deducted by the business if they apply to the business.
- Property Tax – See HOA fees
- Mortgage – See HOA fees
Prepared by Everlance – Everlance is an expense tracking app that allows users to classify their mileage and other business-related expenses for taxes or reimbursement with a single swipe. The app is designed from the ground up for freelancers, salespeople, realtors, Uber & Lyft drivers, creative professionals, and anyone else who wants to easily manage their expense tracking from their phone.We are always we would love to hear from you, message us at support@Everlance.com
*Reference – Finnesse Tax – http://finessetax.com/pdf/Real%20Estate%20Agent-Broker.pdf
*Reference – Starzyk, CPA – http://starzykcpa.com/Disclaimer: the above is written as general guidance and does not constitute professional tax or legal advice as deductions for real estate.Photo Credit: Unsplash - License CC0