Tax Deductions for Realtors: Stay on Top of Your Finances

As a realtor, you might be able to deduct certain business expenses from your income, saving more of your commissions. However, navigating the tax landscape can be confusing, especially if you want to optimize all available deductions. Interestingly, there are deductions specifically for real estate agents, potentially increasing your take-home pay. Read on to find tax deductions for realtors.

Who Can Claim Realtor Tax Deductions?

If you work as a realtor, you can be eligible to claim realtor tax deductions. However, most of these deductions are aimed at self-employed realtors and real estate agents. And if you have your own real estate brokerage, you should optimize allowed business deductions. According to the IRS, an expense that is ordinary and necessary for business purposes can be expensed.

Let’s take a look at some of the common tax deductions for realtors.

Common Tax Deductions for Realtors

After you’ve started your real estate business or are considering side hustles for real estate agents, here is an overview of some common tax deductions for realtors.    

1. Commissions Paid

If you own a brokerage or pay commissions to other real estate agents, those payments are tax deductible. All commissions to employees or other agents are fully deductible business expenses. 

2. Office Supplies

Office supplies and related expenses, such as a printer, computer, phone, desk, or other equipment for the real estate business, are fully tax deductible. Likewise, scanning, photocopies, letterhead, and other business products are deductible. 

Large purchases like furniture, a new copier, computers, or phone systems can be depreciated over several years. In addition, you may deduct office cleaning expenses. 

3. Mileage and Car Deductions

Mileage and car deductions for driving related to showing homes or meeting with clients can also be deductible for business expenses. You can itemize deductions and track expenses like gas, repairs, oil, insurance, car registration, repairs, maintenance, depreciation or lease payments, and other mileage costs. 

Or, you can take the IRS standard deduction. This usually results in a higher deduction. You’ll still need to track mileage, but you can deduct a flat rate of 65.5 cents per mile for 2023 and 67 cents per mile in 2024. 

4. Health Insurance Premiums Deduction

If you’re self-employed, you’ll need to pay for your health insurance. Fortunately, the cost of the premiums is deductible in many cases. To be deductible, the costs must: 

  • Be for yourself, your spouse, and any dependents 
  • Aren’t paid through any kind of pre-tax program
  • You were not eligible to participate in a health insurance program by your employer or your spouse’s provider

Health insurance premiums are considered an adjustment to your income rather than an itemized deduction. You can claim this without itemizing deductions. You can deduct the amount you paid for health insurance from your total gross income.

5. Productivity Software

As a business owner, productivity software can save significant time and costs. Any software or app you use to run your business is fully tax-deductible. You can deduct:

  • Business and accounting software
  • CRM software
  • Lead generation subscription services
  • Mileage and expense tracking software
  • Tax software

6. Marketing

If you work with rentals, the marketing costs are fully deductible as a business expense. Whether you list properties online or through print or local news services, you can deduct those expenses.

Marketing and advertising your company online, through print, video, or other mediums are all deductible business expenses. Consider marketing expenses such as:

  • Advertising costs
  • Vehicle wrap expenses
  • Marketing materials and website expenses

7. Conferences and Conventions 

Attending conferences and conventions for realtors and real estate agents can be powerful networking opportunities to collaborate with other professionals and locate new opportunities. Fortunately, the costs of attendance for these conferences can be deductible for business expenses. Learn more about business travel deduction rules from the IRS

8. Education and Training

If you participate in continuing education or training related to your career as a real estate agent, those educational fees can be deductible for business expenses. Continuing education courses, license renewal fees, and professional memberships are deductible. Fees for attending conferences, workshops, and other industry-related events are also deductible. Keep receipts and records for all your professional development costs to claim the deduction.

9. Business-Related Technology and Equipment

Business-related technology and equipment used in real estate activities can also be deductible as business expenses. Allowable equipment includes computers, smartphones, tablets, software, drones, subscriptions, printers, and scanners. 

Additionally, don’t forget about the cost of the internet and phone services that support your business activities.

10. Legal and Professional Service Fees

Professional and legal fees needed as part of your normal business operations may be deducted as a business expense. These include:

  • Accounting services
  • Legal services
  • Home staging costs
  • Other professional fees

Expenses that Realtors Cannot Claim as Tax Deductions

While normal business expenses are deductible, there are some expenses you cannot deduct as a realtor. These include 

  • Fees from legal violations: You cannot deduct parking tickets, court fees, or other fees related to a legal violation. 
  • Life insurance premiums: If you’re the beneficiary, you cannot deduct life insurance costs. 
  • Regular commuting mileage: The mileage for commuting to work for an office away from home is not a deductible business expense. 
  • Reimbursed expenses: In that case, it’s already no longer an expense.
  • Personal trip expenses: Transportation, accommodation, or meals on a personal trip not directly related to your realtor business are not deductible. 

How to Prepare for Tax Filing and Monitor Tax Deductions for Realtors?

To prepare tax filings and track deductions as a real estate agent or realtor, consider these tips:

  • Track everything: This can be cumbersome without tracking software or apps to help you. You should keep receipts and file them carefully for all other business expenses. 
  • Create digital files: To save time preparing taxes, ask for electronic receipts for all expenses or scan physical receipts and save them into a single folder or cloud-based drive so you don’t have to search later. 
  • Start early: Tax season starts on January 1 of the previous year. By setting up clear accounting systems or using trusted accounting software like doola Books, you can save time and headaches when preparing deductions.  
  • Consider getting help: As a busy professional, a certified public accountant or tax professional can help you prepare taxes or double-check accounting to ensure accuracy. 

How to Claim Tax Write-Offs as a Realtor on Your Tax Return?

You will usually report your 1099 income on Schedule C. To claim tax deductions as a realtor, you can list your business-related expenses on Schedule C. After subtracting business expenses from income, you will input the difference on Schedule 1 of Form 1040. You can use tax preparation software to fill out these forms automatically after you input relevant income and expenses. 

In addition, Section 179 of the IRC allows businesses to take an immediate deduction for business expenses of depreciable assets like computers, equipment, vehicles, and software. You can also learn more about filing self-employment tax here

Maximizing Deductions for Realtors

Becoming a realtor can be an exciting and lucrative career. However, tax preparation can be overwhelming. Whether you have a brokerage or work as an independent contractor, preparing and correctly filing taxes with allowed deductions takes time you could use for showing properties or relaxing. 

That’s why excellent tax preparation software can be so valuable. Consider doola Books to simplify bookkeeping and free up time to focus on your business goals. Or, get doola’s tax package to ensure compliance and online filings!

FAQs

Are there limits to how much I can deduct for certain expenses as a realtor?

There are no set deduction limits for realtors. However, your deductions must be reasonable and necessary for the business. 

What records should I keep to support my realtor tax deductions?

As a realtor, you should keep all receipts and documentation of expenses. You should also keep mileage logs to track mileage for business use if you plan to take a mileage deduction. There are software options to help you track these deductions. 

How do tax deductions affect my overall taxes owed as a realtor?

Tax deductions can reduce your overall taxes owed as a realtor. Direct deductions can reduce your total income and the total taxes due. 

doola's website is for general information purposes only and doesn't provide official law or tax advice. For tax or legal advice we are happy to connect you to a professional in our network! Please see our terms and privacy policy. Thank you and please don't hesitate to reach out with any questions.

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