As a real estate agent, there are many challenges as you work in a housing market that has its ups and downs. However, as part of your business, you have the opportunity to take several deductions that can assist you with your tax liability and add up to be a real savings for your business. This can extend to equipment, as well as travel and other expenses. Working with your tax professional or accountant, such as Coastal Business Services, LLC in Farmingda,e, NJ, you can determine what deductions will specifically apply to your unique circumstances. However, here are six of the top deductions for real estate agents that you need to be aware of.
1 – Automotive Deduction – When it comes to real estate, your car is almost an extension of your office. As you drive to appointments and showings, you are conducting business and incurring business related expenses. Therefore, it is important to keep a log of all the mileage that results from various meetings and showings, as well as any expenses related to the maintenance of your vehicle. However, if you do not want to keep track of gas, car repairs, oil changes and other expenses, you can choose to take the standard mileage rate deduction. Using that rate, you only need to track your mileage, but again, it is best to use a log that you keep in the car for that specific mileage.
2 – Depreciation – If you purchase property or equipment for your business and you know that you will be keeping it beyond one year, you can choose to use depreciation to deduct the cost of the property or equipment over a period of years. Examples of depreciable property include cars, computers and even office furniture. However, you do not always have to use depreciation for these items. You can opt to use Section 179 and deduct the total cost in the year that it was purchased. However, if you choose to do so, you will need to purchase and put it in service that year. Additionally, you will have to make sure that your depreciation does not exceed the limits set by Section 179.
3 – Meals and Entertainment – While it might seem that you could deduct plenty of meals on the road from showing to showing, but the truth is that in order to deduct any entertainment or meal expenses, you need to have a serious business discussion before, during or after the event. However, you will not be able to deduct the cost of the whole event or meal, but only 50%. Essentially, the days of deductions all those long business lunches seem to be at an end.
4 – Supplies, Legal and Professional Services – You will use a variety of supplies to conduct your business, including mailing fliers and marketing materials. However, you can deduct everything from your pens to paperclips as part of the supplies deduction. Additionally, you may be able to deduct fees for services from other professionals, such as attorneys, accountants and consultants, as long as they are necessary to the conducting of your business.
5 – Office Expenses – If you are an independent agent and run your business from home, then you will be able to deduct the costs associated with your home office. This includes the costs of utilities and the mortgage, based on the amount of square footage devoted to your home office. However, if you are a renter, then you will be able to deduct a portion of your rent based on the square footage of your rental home. Additionally, you will have the expenses of a regular office in terms of equipment and supplies that also may be deducted.
6 – Business Travel – If you have to travel for conferences, business trips for training and any certifications, then you can deduct those travel expenses. This includes airfare, car rentals and any other additional lodging or transportation costs. However, you can only deduct 50% of your meals while on the trip. Yet if you plan your travel, you can mix business and pleasure, thus getting a deduction for the business portion of your trip. Therefore, you will want to track those expenses accordingly.
As a real estate agent, you have several deductions open to you beyond the average business owner, so it is important to keep good records in advance of consulting with your tax professional or accountant.
Dennis O'Brien