Tax Deductions for Real Estate Agents and Professionals
The items below are generally deductible, but there are limits and requirements for any deduction. Be sure to keep good records and speak with a tax professional. Call us for a free consultation at 203-548-0220.
Advertising Expenses – The money you spend advertising your services and listings can be deducted. This includes advertising in print or online, website, direct mail, promotional/printed material and sign costs.
Open House Expenses are deductible.
Commissions and fees paid are not taxable. Some can be deducted in the year incurred, others get capitalized and deducted over time.
MLS fees and memberships can be deductible
Office supplies – Office supplies and postage needed to run your business are tax deductible.
Car Expenses – You can deduct the actual expenses of operating your vehicle for business or take a standard mileage rate deduction. There are pros and cons and requirements for each method. Either way, good record keeping is a must.
Business Equipment – Computers, phone, camera and other equipment may be deductible. If they are used for both business and personal purposes, a partial deduction may be available.
Rental Expenses for vehicles, equipment and machinery are deductible. Special rules apply to vehicles leased more than 30 days.
Office, Desk and Facilities Rent – The rent you pay for your office and facilities is deductible from your income.
Business Use of Home – You may be able to take a deduction for business use of your home. The space in your home must be used regularly and exclusively for business to qualify. The deduction is available to both homeowners and renters. Only expenses tied to the business use are deductible and there is a simplified calculation option based on square feet. You must be able to substantiate any claimed expense and this deduction can be scrutinized.
Retirement Plan – Contributions to your own retirement plan can be a valuable deduction as well.
Health Insurance – Your own health insurance may qualify for a deduction.
Training and Continuing Education expenses may be deductible. However, training to meet the minimum qualifications for a new career is not.
Client Gifts – Up to $25 per client per year may be deductible. Keep records of expense, person and purpose. Entertainment is not deductible and a gift that would be considered entertainment cannot be deducted.
Wages Paid to employees are deductible.
Employee Benefits – Certain contributions to employee benefit plans may also be deductible. These include health and accident plans, group-term life plans, dependent care assistance programs, contributions for the benefit of your employees to pension, profit sharing or annuity plans.
Contract Labor expenses are deductible. The IRS is strict about the definition of contract workers versus employees. Be sure to understand the definitions, miscategorizing people can be costly.
Insurance Premiums for your business, such as errors & emissions coverage and business property coverage are deductible.
Utilities Expenses for your business can be deducted, subject to a few rules. You cannot deduct the base rate of a home phone that is also used for business. A second line or added services may be deductible to the extent used for business. Internet access may be deductible, but only the percentage used for business.
Interest Expenses for business property are deductible. This can be mortgage interest on business real estate or interest on items used in operating your business. Be sure to keep separate financial accounts for business and personal use.
Legal and professional services expenses are deductible. These include accountants, attorneys, tax preparation and representation, but only for work related to the business.
Lodging and transportation connected to overnight travel, away from your tax home, may be deductible. You cannot deduct the travel expenses of others, unless they are employees traveling for business and you must be able to substantiate the claim.
Business meals while traveling are subject to strict limits but may be 50% deductible.
Meals for employees may be deductible, but they must be treated as wages and subject to withholding.
Meals for others may be deductible, but there are several requirements to do so.
Food offered at an open house that is advertised and available to the public may be a deductible advertising expense.
Business travel and meals are deductions that some people try to stretch. Don’t! The rules are specific, there are many requirements, and they are strictly applied.
Certain taxes and licenses may be deductible.
Qualified Business Income – Section 199 A deduction – deduction of up to 20% of qualified business income.
Call Aaron Hoffman for assistance with bookkeeping, tax planning and tax preparation for real estate professionals and investors. 203-548-0220
This content is general information for taxpayers. Each situation depends on its unique facts. Do not rely on this site as a sole source of information. Seek professional tax advice before taking any action based on this information