For real estate professionals who manage their finances themselves, finding the time (and energy, for that matter) to organize business expenses can be a chore in itself. If this sounds like you, don’t put off setting your finances in order: procrastination at tax time is a recipe for disaster, not to mention a higher tax bill. We’re here to help answer questions about the most common and also some overlooked real estate agent tax deductions.
Knowing the best realtor tax deductions can help you keep the right records throughout the year and make the most of your deductions come tax season.
It may seem like some extra work, but it can save you thousands of dollars when it comes time to file your taxes (plus, apps like Everlance can eliminate all the manual labor of tracking expenses and deductions!)
To help you get started on the right foot, we’ve outlined some essential tax deductions for real estate professionals to reduce the amount you owe in taxes this year. Keep reading for 15 deductions to claim:
As a realtor, annual fees are an expected cost of doing business. As such, they’re deductible! Remember, the IRS considers business expenses deductible so long as they are:
“ordinary and necessary expenses incurred in conducting a trade or business. An ordinary expense is an expense that is common and accepted in the taxpayer’s trade or business. A necessary expense is one that is appropriate for the business.”
For example, a new camera is probably not a common or appropriate expense for someone running a construction company. However, it definitely would be for a photographer!
For real estate agents, tax deductions in this category include:
That said, there’s a pretty important caveat about professional memberships: the portion of your dues that eventually goes to political advocacy and lobbying is not deductible. Make sure you account for this when filing.
Both general business insurance and Errors & Omissions (E&O) insurance are fully deductible as an IRS real estate agent tax deduction. While you may not deduct self-employment taxes from your taxable income, you may deduct real estate taxes that are necessary for your business.
All those commissions you’ve paid to employees or other agents are fully deductible as business expenses. This is a crucial deduction that can add up fast, so don’t overlook it!
Any software or app you need to run your business is fully tax-deductible, including things like:
Like most modern business owners, you likely spend money on digital and online advertising. Expenses related to advertising like marketing materials, signs, photography, and staging are all deductible through the advertising expense deduction. The broad requirements of this deduction make it an especially valuable tax deduction for realtors.
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 as well. Desk fees can constitute a sizable tax write-off for realtors.
If you don’t have desk fees and work exclusively from home, you may be able to take advantage of the home office deduction as a real estate tax deduction. If you work from home and are self-employed, 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.
That said, there’s a slight caveat: your home office must be used exclusively for business in order to qualify for the deduction — and the IRS is very strict about this requirement.
This means that your bed, your sofa, or your favorite patio chair don’t count as a home office, according to the IRS, and are therefore not deductible. Find all the details of how to qualify and calculate your home office deduction here.
As a competitive real estate professional, you likely invest in continuing education or other training courses to stay at the top of your field.
If this sounds like you, you may be eligible to deduct expenses like materials costs, registration fees, and related travel expenses. However, there are a few requirements from the IRS:
If all of the above apply, then you can deduct expenses like course fees, tuition, books and supplies, lab costs, transportation to and from your courses and more.
Similarly to education and training, if you’re attending a conference or convention for business purposes—whether for education, networking, new business opportunities or some other business-related reason, you can deduct the cost of these conferences.
As long as you’re not reimbursed for any of these expenses by an employer, you can deduct things like:
Office-related expenses like photocopies, letterhead, and other products you need to keep your business going are all tax-deductible.
Large purchases like 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.
Should you choose to go the depreciation route, be sure to do your research and keep detailed financial records.
If you have a dedicated landline for your business, that expense can also be fully deducted. If you don’t have a landline, don’t worry! You can also deduct the business percentage of your cell phone bill if you use it for work — just use your bill to track the percentage of phone usage that was for your work.
Do you need to grab a meal while traveling on business? Are you constantly taking clients out for lunch or hosting dinners to generate referral business? Keep track of those expenses, because in either case, you’re able to deduct 50% of the total expense. All those lunch meetings and airport sandwiches can add up!
Important note: for 2021 and 2022 only, you’re allowed to deduct the full amount of business-related food and drinks purchased from a restaurant. Otherwise, the 50% rule still applies.
That said, we need to make a special note about entertainment expenses: according to IRS guidelines, these expenses are no longer deductible. This means that, while you can deduct food expenses related to your realty business, you may not deduct things like event tickets, client trips, sporting event outings, etc. (unless they’re given as a gift, which we’ll discuss in detail later).
Each and every mile you drive for your real estate business is a potential tax deduction. And with the current IRS mileage reimbursement rate sitting at 62.5 cents per mile, those miles driven really add up!
Between listing presentations, showings, closings, and more, realtors can save thousands on your taxes just by tracking your mileage.
While there are some of us that cling to a notebook for recording mileage, automating your mileage tracking can save you time, energy, and money by allowing you to record your business mileage without a second thought.
An automatic mileage tracker app like Everlance can be a lifesaver, recording each mile accurately and allowing you to categorize your trips whenever you’d like. 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.
If you sent any client gifts throughout the year—gift baskets, tickets to events, or other gifts—these are partially deductible, as long as you follow the IRS regulations:
You also must keep records proving the business purpose of the gift as well as the amount spent.
If you’re a self-employed realtor and pay for your own health insurance, the cost of the premiums are deductible in many instances. In order to be deductible, the costs must meet the following requirements:
Keep in mind that health insurance premiums are an adjustment to your income rather than an itemized deduction. You can claim this deduction even if you’re not itemizing deductions. Instead, you’ll deduct the amount you paid from your total gross income to lower your adjusted gross income—and lower your tax bill, by default.
For more details, check the IRS website.
Have you teamed up with other real estate agents in your office? This has become a very common trend in brokerages and while having a team can increase sales, your expenses become more complicated.
For more potential deductions, check out our guide to self-employed tax deductions.
Our company mileage tracking software and teams expense log help you and your team stay organized for taxes.
Everlance is the easiest way to automatically track your business mileage, expenses and deductions.
If you're like most real estate agents and you practically live in your car, Everlance is exactly what you need to maximize your deductions and your valuable time. With Everlance, you can ditch the paper mileage logs or Google Sheets and let the app record your mileage accurately and automatically using GPS. When you're done with your drive, slide left or right (for Business or Personal) and we'll log the trip and tally up your deductions.
Need to pay a toll, pick up a bottle of wine for an open house or pay for parking? Just snap a picture of the receipt and we'll keep it stored safely in the cloud so you always have a record of it. All of your business expenses, mileage deductions and receipts will be safely stored in one place, with IRS-compliant and tax-ready reports ready for you come tax season.
Download Everlance today for iOS and Android.