Common Tax Deductible Expenses Every Realtor Should Know About
With tax* season coming, now is a good time to review how you track your business expenses and make sure you’re claiming all your deductions. If you haven’t been diligent about logging expenses, now is the time to make the small changes necessary to ensure that you’re leveraging every expense possible to reduce your tax burden. Let’s go over some of the most common tax-deductible expenses every realtor should know about.
And, before we get started, let’s not forget the DISCLAIMER: *The Coachable Realtor and its content creator are not financial advisors or tax advice experts. The information and content contained in this blog post are based on personal experience and are for educational purposes only. Tax rules vary by location, so check with your local tax authority, consult a tax professional or speak with your Broker of Record regarding your taxes and tax deductions.
Business Expenses
Business expenses are the costs of running your real estate business. They are often tax-deductible, which means they can reduce your taxable income. Key expense types for realtors include:
Office Supplies and Equipment: Items like computers, printers, and supplies needed daily. Keep receipts to claim these expenses on your taxes. For example, a $1,200 laptop and $300 in supplies might be partialy deductible.
Marketing Materials: Business cards, brochures, flyers, signs, and even your website.
Home Office Deduction: If you work from home, you may be able to deduct part of your rent or mortgage, utilities, and upkeep related to your office space.
Vehicle Expenses
Transportation is key for realtors. Deducting vehicle expenses can save you money.
Mileage Deduction: Instead of tracking actual vehicle expenses, realtors can opt for the standard mileage rate.
Actual Expenses: If you prefer to deduct actual vehicle expenses, this includes fuel, repairs, insurance, and depreciation. You must document all business versus personal use.
Professional Fees and Education
Continuing education is important for real estate agents to stay updated on rules and trends and compliant with their governing body’s licensing standards. Some education-related costs may be tax-deductible:
Licensing & Insurance Fees: Fees required to keep your license might be deductible.
Continuing Education: Costs for classes, workshops, and materials can add up. For example, if you spend $800 on a workshop and travel, part of it might be deductible.
Professional Memberships: Fees for groups like the National Association of Realtors, OREA or local associations can count as business expenses.
Client-Related Costs
When doing business, you often incur expenses related to clients and properties. Here are some deductions to consider:
Staging Expenses: Home staging costs, including furniture rental or professional stagers.
Gifts for Clients: Gifts for clients are typically deductible. This could be a small token of appreciation, like a $20 gift card or a housewarming gift.
Client Meals and Entertainment: Meals with clients can be partially deducted.
Technology Costs
Technology plays a crucial role in real estate transactions:
Cell Phone & Computers: A realtor's "office" is any place with connectivity, making your cell phone and laptop key business tools. Monthly phone and wifi bills may be tax-deductible—track these expenses. New devices and accessories should also be logged as business costs. Check with your accountant for local rules.
Software Subscriptions: Many realtors use a CRM and listing software costing $200–$1,200 annually, which are often deductible.
Website Maintenance: Website costs, including domain and hosting, can total $100 to $500 per year.
Preparing for Tax Season
After you get this year’s taxes sorted out, start the new year off right by being prepared for the year ahead. Make your life easier and more profitable by logging expenses which will save you time and ease your tax burden. Here are some ways to keep your financial documents organized:
Keep Records: Maintain a comprehensive record of all business-related expenses throughout the year. Save receipts (make notes on them before you file them, for whom or what the receipt is related to), invoices, and bank statements to support your tax deductions.
Manage Receipts & Invoices Regularly and Consistently:
Avoid waiting until January to organize your receipts- I prefer logging receipts monthly, as the credit card bills come in. Maintaining a diary on your phone or a physical one to track your appointments can help you identify whether a receipt is for business or personal use, making tax preparation simpler. Microsoft 365's Excel is an excellent and inexpensive choice for keeping a spreadsheet of your expenses, or use an app like QuickBooks to easily record all your receipts and expenses in one place.
Write-Off Like a Rock Star!
Rock stars are self-employed and write off all types of expenses for things that are necessary to being a rock star like equipment, travel, studio space and professional development. Not much different from being a Rock Star Realtor! Understanding tax-deductible expenses in the real estate profession is crucial for optimizing your tax returns and ensuring compliance. By recognizing various deductions—from office expenses to client-related costs—you can significantly reduce your tax burden and focus on growing your business.
For a much smoother tax season next year, keep detailed records and consider consulting with a tax professional. This proactive approach can help you navigate the complexities of business taxes confidently, allowing you to concentrate on what you do best: helping clients with their real estate needs.
Here’s to closing deals and opening doors!
*The Coachable Realtor and creator are not financial advisors and or tax advice experts. The information and content contained in this blog post are based on personal experience and are for educational purposes only. Tax rules vary by location, so check with your local tax authority, consult a tax professional or speak with your Broker of Record regarding your taxes and tax deductions.