Real Estate Tax Credits and Deductions You Don’t Want to Miss

March 26, 2016

In real estate, there are a lot of expenses associated with buying and selling homes – especially if you’re an agent. Luckily, there are a number of tax write-offs that can be used to offset the cost. You just have to know what deductions and credits real estate agents can claim and how to claim them.

Resources like ADP Compliance Insights are designed to help professionals uncover every possible tax break that’s currently available. The IRS makes updates every year, but below is a rundown of the write-offs that are most commonly used by real estate agents every tax season.

Licensure and Affiliations Expenses

Right from the start, real estate agents can begin deducting expenses because you have to pay for your licensure. Any other professional organizations and affiliations that you pay to join can also be deducted. A good example of this is membership in the National Association of Realtors.

Educational Expenses

Real estate is one of the few occupations that require continuing education to keep your license up-to-date. There are also a number of paid courses you can take to receive additional certifications. Every time you pay for a course or class that’s one more item than can be deducted.

But don’t forget that industry publications, books, etc. also fall into the education category of deductions.

Marketing Materials

Marketing and real estate go hand-in-hand. All of the marketing materials that you use to get a home sold can also be deducted as business expenses. This includes everything from flyers to ads on Google.

Professional Services

Any time you hire outside help that can be considered a business expense. Common examples include home stagers, photographers, virtual assistants and copywriters.

Home Office Expenses

If you use a space in your home to do business (which most real estate agents do) you’re eligible for a big tax deduction. As long as the space is strictly used for business you can use the home office deduction. To do so you’ll need to figure out the square footage of the office space. This will help determine what portion of the related expenses will be deducted. They include:

· Rent/Mortgage Interest
· Utilities
· Internet Access
· Security System

Office supplies are another deduction, but those can be listed as a business expense rather than a part of the home office expense.

Equipment and Supplies

Speaking of office supplies, anything that you purchase for work is considered a business expense. That’s why it’s important to hold on to every receipt for office supplies and equipment.

Vehicle-Related Tax Deductions

No matter how much you support public transportation, real estate agents have to have a vehicle. There’s just no way around it. But the costs associated with this expensive piece of work equipment can be deducted. Work vehicle deductions include:

· Wear and Tear/Depreciation
· Gas
· Maintenance
· Insurance
· Interest on payments
· Tires
· Car washes
· Registration
· Licensure

You can also choose to take a deduction based on mileage. For 2015, the deduction per mile is 57.5 cents.

Healthcare Costs

Since real estate agents are considered sole proprietors of their own business, you are able to deduct your health insurance costs. This includes the monthly premium as well as any out of pocket costs for doctor visits and medical care.

Miscellaneous Write-Offs

There are many more miscellaneous expenses that can be used as a tax write-off. Some of the more common ones include:

Meals – Did you take that picky buyer out to lunch three times over the six months it took them to put in an offer? They can be written off as a business entertainment expense.

Travel – If you travel out of town to a convention the related expenses can be deducted. This includes plane tickets, lodging and car rentals.

Communication Expenses – In real estate, your phone is one of your most valuable pieces of equipment. The cost for the device and monthly phone service fees can be deducted. You can also write off depreciation of your smartphone.

Client Gifts – Many agents will send their clients a gift after the close of a home. These small tokens of appreciation can be deducted on your taxes.

As a real estate agent, you are always championing tax breaks for homeowners. Fortunately, the tax deductions and credits listed above can help you out as well.

If you are in doubt of whether an expense can be deducted, reference the IRS’ real estate agent tips. Since sole proprietorship is also much more complicated than filing as an individual, it’s a good idea to seek the advice of a certified accountant if you want to ensure that everything is done correctly.