Working as a real estate agent can be a profitable activity for hard-working, clever, and communication-savvy individuals with a willingness to attain their goals. However, this activity also incurs a lot of expenses.
In this article, you will find possible deductions real estate agents can claim on their recurring expenses.
Real Estate Agent Write-Offs – Taking a Closer Look
Car Travelling and Commuting Expenses
It is almost impossible to think about working as a realtor without driving clients around to visit properties, going to open houses, and driving to attend meetings with several people every other day.
Fortunately, real estate agents can deduct car expenses from their federal tax returns. Two main methods can be used to deduct car expenses. The simple method is based on a rate per kilometer driven, while the complex method requires the realtor to keep track of all car expenses.
In both cases, it is fundamental to keep receipts as proof to back up the deduction. The best approach is to consult an experienced CPA to find an adequate strategy for your case.
Office-Related Expenses
Operating and managing a realtor’s office can be a challenging task. The variety of supplies required in the daily operations includes pens, paper, printer ink, real estate niche magazines, etc.
The Internal Revenue Service (IRS) allows realtors to claim deductions on office expenses and supplies, including desk fees, maintenance fees, cleaning service fees, and other similar costs.
Depending on the size of the office and the demand for supplies and maintenance, the tax deduction can result in a significant amount of money saved on taxes.
Advertising Expenses
The success or failure of a realtor’s business largely depends on the ability to attract new customers and turn them into loyal clients. Advertising is a key in this cycle, which automatically results in more expenses for real estate agents.
When filing tax returns, realtors can deduct advertising expenses like Google ads, Facebook ads, ads published in local newspapers, billboards, bus-bench ads, and any merchandising-related costs.
Similar to other tax deductions, IRS will require a detailed track of the advertisement expenses to back up the deduction claims.
Meals and Entertainment Expenses
An intrinsic aspect of the real estate industry is networking. Building rapport with current or potential customers requires realtors to attend events and spend money on meals and entertainment.
With the guidance of a CPA, realtors can deduct up to 50% of all client-related expenses for meals and entertainment. As long as the number of expenses is “reasonable” and the realtor can demonstrate it through receipts, it is possible to claim it with the IRS.
Is it Possible to Deduct Home Office Expenses on a Realtor’s Tax Returns? – A Realistic Viewpoint
Realtors can deduct home office-related expenses when filing tax returns with IRS. However, it is crucial to consult with a CPA to keep track of these expenses before filing for a deduction.
In recent years, the agency has become stricter in scrutiny, as self-employed realtors working out of home must demonstrate their home offices are their primary location for business.
An important element of deducting home office expenses as a realtor is the proportion of these expenses that is equivalent to the space the home office requires within the agent’s home (i.e., the office’s total square footage out of the property’s size).
Save Money on Tax Returns as a Real Estate Agent – Immediately Consult with an Expert CPA
The more refined your tax-saving methods are, the more money you can save on taxes as a realtor. Immediately call Edward D. Quilca, CPA at (786) 310-5582 or email [email protected] to find the best tax strategy for your case.
