Your job as a real estate professional is hard enough. You've got to bend over backwards to get seller listings and hustle to get buyers. You're driving back and forth from the office to potential clients to open houses and more. It's how the job works and when you do it right, the hard work can really pay off.Today we want to look at common tax deductions for real estate agents. Deductions that may seem small but can really save you a lot of money.
10 Common Tax Deductions For Real Estate Agents
- Vehicle Mileage: This is a no-brainer, right? Every agent / broker is going to be deducting their mileage for tax purposes. It makes sense as this is one of the biggest deductions you can take. However, unless you're using an automatic mileage tracker (like Everlance!) keep an accurate account of your mileage is going to be a lot harder than it should be.
- Buying or Leasing A New Vehicle: We won't debate all of the merits of buying vs. leasing a vehicle, instead we simply want to say that if you're buying a new vehicle you can deduct the depreciation and if you're leasing you can deduct the entire monthly payment.Either option is going to add up to some serious savings and if you already needed that flashy car to impress potential clients, you'll be pleased to know you can expense the bulk of it.
- Home Office Deduction: The rules are strict and the IRS has them all laid out for you here, but if you have a qualifying home office you can deduct thousands every year. Here's a link to the Simplified Home Office Deduction section for self-employed individuals on the IRS.
- Real Estate Software: From CRM's, digital flyers, open house software, and on and on. If you use software or a service (like a SaaS) to do your job you can deduct it. More independent agents are footing the bill for this software than those as part of a larger chain, however, even for those employed by brokerages there are likely still monthly costs for software that you use outside of what the brokerage covers. Make sure you're deducting them!
- Marketing & Advertising: Of course you're going to deduct this, right?! From bus benches, to flyers, to newspaper ads to lead generation services - this all-encompassing category is often one of the best ways to offset your costs of generating sales. Whether you're independent or an employee, you're likely fronting a lot of the marketing & advertising costs for your listings and lead gen. Don't forget to deduct it!
- Taxi's, Uber & Lyft: Do you live in a big city and pay for transportation during the course of business? it could very well be deductible. In some major cities like New York and San Francisco, this is a very convenient way to get around and it's a smart idea to deduct these costs. The upside to ridesharing vs. driving is the simple fact you can communicate with clients much easier when you're not driving, tying up any loose ends you might have before an open house, or firing off a few emails.
- Conferences & Conventions: We realize they're boring, often expensive and don't always provide the networking opportunity you'd have hoped, however the good news is that you can deduct every dime of the cost of the conference and often a good portion of the travel and lodging if you were required to travel to the conference. Just make sure that you weren't reimbursed for this business travel already by your employer if you're going to deduct it on your personal return!
- Client Meals & Entertainment: This section is tricky. Generally, only 50% of the total cost of meals & entertainment is allowed and the IRS is very strict on what qualifies. If you plan to deduct meals & expenses please read through that link to make sure it's a qualifiable deduction. Don't forget to keep receipts! This would be a fantastic time to mention that Everlance can do this for you. Simple snap a pic of the receipt and we'll store it safely in the cloud.
- Desk Fees: We all know in the real estate world that the only free lunch is the nosy neighbor that comes by to grab food during your open house. Everyone else pays the price to play the game and this is where desk fees come in. We won't go into splits, or choosing the right brokerage to work for, however we will say that these fees are deductible and since they can have such an impact on your profit it's imperative that you deduct them from your taxes.
- Client Gifts: There's a very strict deduction limit of $25 for gifts per person. There is no limit on how many gifts you can give. In fact, there's no limit to how much you can spend, the bad part is that you can only deduct $25 per person.This means that you can only deduct $25 from the total cost of the $189 bottle of Dom Perignon you purchased as a closing gift. Oh well! It's the cost of doing business, and hopefully you made many times that in commission.
3 Things You Can't Deduct From Your Taxes
- Clothing: If there's one industry that could use a deduction for clothing it's Real Estate. Your outfits can make or break a sale, or client meeting. They're as much a part of your "look" as your vehicle, and there's no doubt that the right outfits can add to your bottom line. Unfortunately, the IRS will not allow the deduction of clothing that isn't a "uniform" - although, there is an exception. All clothing with a company logo can be deductible!
- Your Commute: In a perfect world we'd get to deduct the cost of our commute. After all, we wouldn't be commuting for pleasure! Sadly, the IRS doesn't care. Your choice to live however close or far from your place of employment is your problem.
- Your Volunteer Time: You can deduct monetary donations and expenses for supplies related to charity/volunteering, but you can't bill out for your time.
Want to learn more about Real Estate deductions. Check out this article: 53 deductions for real estate professionals
How To Use Everlance To Get The Most Out Of Your Deductions
Everlance is the easiest way to automatically track your business mileage, expenses and revenue. 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.Accurately and Automatically Track MileageNo pen-and-paper mileage logs needed. Simply drive. We do the rest. When you're done with your drive, slide left or right (for Business or Personal) and we'll log the trip and tally up the savings.Add & Store ReceiptsNeed 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.Your job selling houses and attracting clients is hard enough, let Everlance take care of the mileage.