Commonly Missed Tax Deductions for Real Estate Agents
Now is the time of year when we all want to find ways to keep as much money in our pockets as possible come April 15th. For Real Estate Agents, tax time comes with many of opportunities to save, but only if you know which deductions to take. With that in mind, here are some commonly missed tax deductions every agent should look for when they file this year:
1) Internet Advertising
Whether you’re advertising for a listing or to attract customers, any money that you spend on advertising is deductible, and many real estate agents forget to deduct online advertising.
When you’re placing online or paying an online service to help distribute your ads across the web, remember to get a receipt or invoice from the site. Most sites have some sort of “Order Confirmation” screen when you place an order or pay a bill, and if you print a copy of the page or save it as an image or PDF file, this counts as a receipt.
TIP: Create a folder called “Vendor Bills” on your computer or in your e-mail box create and use it to save all of your online purchase receipts. That way they will all be in one place and easily accessible when you need them.
2) Automotive Expenses – More than just Gas
Being a real estate agent is such a travel-heavy job, so most agents know to deduct their gas and mileage expenses. However, there are other expenses that are deductible. At the top of the list of commonly missed deductions are parking and tolls. If you have to park anywhere, be sure to get a receipt so you can write it off.
It is also a good idea to write down the related client’s name on the receipt so you know where the expense came from. The same goes for any tolls that need to be paid during business travel.
TIP: Keep a travel log so you can record mileage and expenses that you incur during work based travel time.
3) Write-offs for Treating Your Clients Well
Taking care of clients is more than just a gift at the end of a transaction. And while gifts are deductible, so are other expenses you incur to make your clients happy, including business meals and any forms of entertainment used to “treat” the client. If you take a client to dinner, a show or sporting event, the cost is deductible so long as the expense is not considered lavish or extravagant. You also have to talk business at the meeting, you can’t just take a client out to a meal and talk about the game last night.
Meals and entertainment can be either 50% or 100% deductible, depending on the type of event. For more information, you can read up on the IRS rules for deducting meals and other expenses.
TIP: Have backup documentation such as receipts or invoices to ensure that the IRS will allow the deduction. The best possible documentation includes:
- Expense amount
- Reason for the Expense
- Date and time of the expense
- Names of the people you were with and your business relationship to them
- A receipt or invoice
4) Office Supplies
Business expenses are deductible, so just about anything in an office is fair game. Computers, electronics, and office supplies are the big ones, but there are more. For example, newspaper and magazine subscriptions are deductible if they are for your business.
Another deduction that most real estate agents miss is the postage deduction. Considering how many real estate agents still use mass and other mailings, this deduction can really add up, especially the occasional trips to the post office where you pay by cash. Be sure to document how much you spend so you can write it off at the end of the year!
TIP: Get in the habit of taking a picture of your receipts with your camera phone. You can then email them to yourself or use Expensify, a great free app for your smart phone that will turn your photos into expense reports in a few clicks.
5) Utilities
If you have a home office, then you’re paying utility bills, and they can add up. Don’t worry though, utilities are deductible! So few people remember to claim their utility bills on their taxes! Make sure to keep track of your utility bills including electricity, water, and sewer expenses. For more home office deductions, check out the IRS Publication 587.
Gita Faust
Gita Faust is an Advanced Certified QuickBooks ProAdvisor & Intuit Writer/Trainer with more than 15 years experience helping individuals and business owners conquer financial management challenges. For tax tips, financial management, and real estate advice from Gita, check out her blog at http://www.FastTracConsulting.com.
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Legacy Comments
Thanks for the information. Every year I say that I’ll be more organized with my expenses, and I’m usually pretty good, but your ideas were helpful and I think I’ll take your advice.
Thanks for the tips…
Thank you for this valuable information. Expensify is just what I need!!! I have downloaded the app now.
awesome I think this is worth my attention…
Great info. I too Bonnie am working at getting more organized each year.
Hi Gita:
One deduction I wonder if many real estate agents are taking, which they should not, is “marketing” expense of driving their car around with those magnetic signs or, now, full vehicle wraps. Just because you have a sign or whatever on your car does NOT make the mileage business miles. There has to be a relevant business purpose for each mile driven and “marketing” is not considered a relevant purpose in and of itself…
But they can deduct the cost of the magnet or the wrap…..correct?
Tracy, Yes you can deduct the cost of magnet wrapping.
Hi Gita,
Can I deduct the admin fee/professional fee ($295) that I paid for (out of my commission check) my client, my gift to my client???>
Also, can I deduct annual dues I pay to my brokerage?
Can I deduct staging fees I volunteered to pay for my clients?
Thank you. –Rose Baldwin
Thank you for the tax tips! I think we all can use helpful hints on taxes!!!!
Thank you, Gita, for your expert advice. I find that entering everything in Quicken as a cash or checking account entry, makes my year end taxes much easier for me. I also categorize my credit card statements as well, and give my tax accountant an expense print out along with my receipts. It takes a little work, but is worth the effort. The deductions are my tax accountants decision. I just give him the information.
Thank you for the good information and the reminder that in this economy we need every break we can take advantage of.
Richard
Love the tips – I’m more organized this year than last, so I will surely be able to take advantage of these! Maybe one day I’ll start tracking the vehicle use and gas cost. Thanks again!
Thank you for all your info. I use so much of your info in my Real Estate business to make my business better. I always learn something new. Thanks again. Keep it coming.
Mileage is what keeps me from writing a check to my Uncle Samuel for decades.
Remember: get notepad, write down beginning mileage every morning and where you are going that day. It’s simple and mileage will get a better deduction than keeping expenses and so much easier.
Always use a CPA. ALWAYS!
I enjoy all the info, that have to do with all my Real Estate needs.You cover a wide range of topics and I always learn something to make my business better. Thank you!
awesome I think this is worth a better look…
Excellent information, thank you!
Thanks, great advices. Will be sure to take advantage of this.Thanks
Thank you so much. I attended a seminar about 12 years ago that set me on the path of deductions as a Realtor. I find it best to be a PLC (formally a PC) and use the Checking and Credit Card for business use only. This makes it easy for the bookkeeper. Then when it is time to visit my CPA I am good to go. You gave tips to help me tweek it even more!!! THANKS.
Good tips Gita. Also your brokerage fees, if any, MLS fees, any Educational expenses such as trainings, NAR/ or other business related certifications, annual fees to the certification(s) are also deductable. I used CPA for the first few times and started doing on my own with help of my spouse.
Suma, That is right. Thanks for sharing.
What is the $ amount that you can give a Client for a gift that would be deductible.
Thanks.
Per the IRS rules $25.00 check out the details on http://www.irs.gov
Thank you for the reminders. Since my car is just an extension of my office, I also keep receipts for car washes and detailing!
There is a fine line for deduction the car washes. It depends whether you are taking the miles driven for business or total amount spend on the car. I would recommend taking the receipts and the total to your accountant at tax time.
Gita – thanks for sharing, great info (and timely)! Know you talk about Utilities here, and I think you may have touched on this topic before, but could you do an article on the ins-and-outs of depreciating your home office as well.
Thanks
Bill
Help with Short Sales
Homes for sale in Horsham
Be very careful w/the home office deduction. It’s a red flag for the IRS because it’s often improperly used. The home office has to be strictly used for business purposes only.
Very good and helpfull informaton. Thanks for sharing.
Wow, do I ever have the deductions. I do short sales and it seems like my ink supply is always hungry. Thank for the post.
Lorelie
Short Sale Realty of Florida
352-613-3988
Along the lines for the home office deduction, I also attended a seminar where we were told that you may also be able to depreciate part of the your driveway and garage (assuming you have both or one), as they are used for your business vehicle…
Thoughts?
Meg
Homes for sale in Ambler
Homes for sale around Philadelphia PA
Hi Meg, I do taxes part time and using driveway/garage as part of your in home office is probably pushing the envelope w/IRS. Not worth the red flag potential. However, if your garage or part of it has been converted into an office then the square footage used as your office can be used for the deduction calcultion. Don’t forget all of your in home office depreciation has to be recaptured when you sell your home too.
Commonly missed. I was hoping for new expenses that realtors can deduct for 2011. I knew about these.
I also deduct a percentage of my cell phone bill each month for business calls.
Nice tax reminder! Was just about to do my taxes when I read the article. Reminded me I had to write off some Facebook Ads I had posted earlier in the year, you saved me some cash!