Are you a busy real estate agent? Are you wondering how to pay taxes on time with all of the complications in your business due to current world events?
Believe it or not, there are a number of real estate write-offs that could end up saving you valuable time and money. But you’ll need to know which ones you’re eligible for to make the most of your earnings this season.
Here’s what you need to know about tax write-offs for real estate agents.
1. Education
One of the real estate agent write-offs you should be aware of is the money you spend on education.
Many states require continuing education classes in order for you to maintain your license. These days, you may be getting your credits online with interactive support from colleagues and teachers.
You may be taking classes in risk management, investments, or policies in your state. These can all help you to become a more knowledgeable, profitable, and productive agent.
You’re allowed to claim a tax credit for your education as long as you get an official tax certificate from the institution you attended. Make sure you get proof of your work as you rack up courses throughout the year!
2. Home Office Expenses
Many real estate agents work from home. This means that many of your business expenses are spent on home office supplies, including your desk, computer, and paper supplies.
Believe it or not, you can deduct $5 for each square foot of your home that gets used for business, for a maximum of $1,500. Your home office needs to be a section of your home that isn’t used for any other purposes. It also needs to be your principal working space.
If you’re working from home temporarily because of COVID-19, you may also be eligible for a partial-year home office tax deduction.
3. Car Expenses
This is one of our favorite tax tips. If you’re a real estate agent, your car is much more than just a way to get to and from the grocery store. It’s a critical part of your livelihood, as well as the way you present yourself to clients and colleagues.
Make sure you keep careful records of when you are using your car to view or show properties. Your mileage can be written off at tax time.
In addition, you may be able to deduct other car-related expenses. The amount you end up deducting will depend on what percentage of your driving is used for business. So, if you’re driving is work-related 70% of the time, you can deduct up to 70% of your car expenses.
Car-related expenses can include maintenance such as oil changes and repairs, parking and tolls, and insurance and registration. You can also include such expenses as vehicle depreciation and car washes.
As always, keeping good records is a critical part of making sure your real estate business tax write-offs are above board. Keeping a spreadsheet throughout the year means you won’t have any work to do once you’re ready to file your tax return.
4. Business Travel
Being a real estate agent may mean that you need to go to other states or out of town for conferences or viewings. When you do, you’re allowed to deduct transportation costs, such as your airfare or cabs. You can also deduct your hotels and lodging.
You can, however, only deduct about 50% of meal costs. These meals must also be “ordinary and necessary.” You should also be paying for the meals of current or future customers or clients.
5. Marketing
Advertising yourself is directly related to your business, so you’re allowed to deduct them. This includes up to $5,000 in starter costs, which includes things like advertising and business cards.
Real estate agents could be partnering with local businesses or hiring a graphic artist to help with their website. They might be reaching out to social media influences or reaching out to local radio stations. All of these options cost money that you could be writing off when you complete your tax return.
So the next time you take out a Facebook ad or create colorful flyers for neighborhoods you work in, be sure to keep the bills and receipts. Necessary business expenses are tax-deductible expenditures.
6. Home Utilities
If your home is your office, you need the things in it to work. You can look into writing off the utilities you use specifically for your business, including WiFi, your power bill, and even part of your rent.
If you use your home regularly for business and meetings, you may also be able to deduct your mortgage interest, property taxes, and home insurance. This is only acceptable, however, if you’re self-employed. Employees aren’t eligible for such deductions.
7. Pass-Through Deduction
Most real estate agents have pass-through businesses. This means that profits flow through to you and get taxed as part of your individual income tax.
The pass-through deduction means that you may deduct up to 20% of your net income from your business. This deduction gets phased out, however, if your income exceeds a certain amount. But if it’s under the limit, you could be looking at a healthy tax deduction that you should take advantage of.
Take Advantage of These Real Estate Write-Offs
If you’re a real estate agent in today’s market, your daily life and expenses can be somewhat unpredictable. When you know about the right real estate write-offs, however, you’ll be able to save money when it becomes tax season. Just be sure to keep records throughout the year so you’re able to get all the deductions you’re entitled to!
Don’t stop getting savvy about your finances now. For more great lifestyle advice, read our blog today.
