What Real Estate Expenses Are Deductible For Taxes
There’s a lot to love about working independently as a real estate agent. You set your own hours, run your own business, and work on your own terms. However, navigating taxes isn’t always easy. Finding the best reductions is essential to keeping your tax bracket affordable.
As a real estate agent, you have a lot of deductions available for you when it comes time to file. It’s important to familiarize yourself with these deductions so you can accurately track costs through the year. By failing to utilize all of your eligible deductions, you’re essentially giving money away. As a self-employed real estate agent, these are the most common expenses that are deductible for taxes.
1. Vehicle Mileage
The most well-known deduction is the mileage you put on your vehicle. This is a set rate that the IRS publishes each year. This rate will factor things like wear and tear and gas into the number. In 2018, the standard mileage rate was 54.5 cents per mile.
Of course, in order to receive this deduction, you’ll need to keep track of your mileage accurately. You’ll need to log your miles, something you can do manually or with a smartphone app. The Everlance app makes it easy to track your business mileage on the go without the hassle, and it’s free to use.
2. Home Office Deduction
If you work from home, you might be eligible for the home office deduction. However, this has to be a dedicated workspace that’s used only in your business, and it also has to be your primary workspace. This means you can’t write off your living room if you occasionally do work from home!
You have a few options when writing off your office space. You can classify your office as an indirect expense by deducting a percentage of your home payment, utilities, and internet costs. You also qualify for direct expenses deductions, such as if you needed to purchase furniture or technology that is solely used in your office. Finally, you might be eligible for the standard home office deduction which is around $5 per square foot.
3. Phone and Utilities
It’s impossible to run your real estate business today without a smartphone and internet. You can write off things like your cell phone and your tablets if you use them for business purposes. This usually means getting a deduction on the monthly service bills or the purchase price of your device.
You have two options for keeping track of your usage. You can purchase a separate phone or tablet which is solely for business, or you can log every second you use your phone for work. As you can guess, the first option is simpler.
Your business doesn’t run itself. You need a lot of supplies to keep up with daily tasks. Everything from pens to printer ink is tax-deductible. This includes supplies and materials for real estate practices like signage or even marketing costs. These might seem like small things, but they really add up into big savings.
5. Client Meals or Gifts
Another deduction that might surprise you is for client costs. When you work in real estate, you sometimes have to go above and beyond to land the sale. Unfortunately, you can’t write off your solo lunches or dinners, but you can write off half the cost of any meals where you’re primarily discussing business with clients.
In general, if you can prove the meal or entertainment were business-related, you can write off half the expense. Your client gifts are also deductible, though only a portion of it is covered. Again, it’s still important to keep track of the small things which will add up over time.
6. Membership Fees and Professional Services
If you’re a part of a local real estate board or professional group, you can write off these annual costs. This includes things like dues for certifications or special training. This is true for all dues except those that go to political lobbying, such as a portion of your National Association of Realtors fees.
Similarly, if you use professional services, you can write off these expenses. This might include paying for a layer to manage your documents, working with a marketing professional, or any other fees you might run into as an independent real estate agent.
Make the most of your deductions. You work hard for your money, and you deserve to enjoy the fruit of your labor. Keep track of how much you’re spending throughout the year so you can save big on taxes.