There are so many money-saving tax write-offs for real estate agents! Not only do real estate agents make good money, but they get to reduce their income tax burden through the tax write-offs that only the self-employed get to take advantage of.
But before we jump into our list of the top 10 money-saving tax write-offs for real estate agents, let’s explain what a tax write-off is.
What is a Tax Write-Off?
A tax write-off (also known as a tax deduction) is an expense that you are allowed to subtract from your income for the purposes of calculating your income tax due to the IRS. Write-offs save you money by lowering your taxable income.
For example, if you made $79,000 in income last year, but you spent $10,000 in business-related expenses (like marketing, training, and transportation), you get to subtract the $10,000 from the $79,000. This means you get taxed on $69,000 of income instead of $79,000, so you owe less in taxes.
Nearly every expense for your real estate business is tax-deductible as long as the expense is:
“ordinary and necessary” (a yacht, for example, would not qualify as an ordinary and necessary real estate business expense).
directly related to your real estate business, and
a reasonable amount.
So keep track of every penny you spend for your business. You’ll need careful documentation to back up your write-offs.
10 Money-Saving Tax Write-Offs for Real Estate Agents
Here are the 10 money-saving tax write-offs for real estate agents, in no particular order.
1. Real Estate License Expenses
Getting your real estate license and maintaining its active status creates a few expenses. Of course, these expenses are all tax write-offs for real estate agents.
Licensure costs (including your state license fees, exam fees, fingerprint fees, etc.)
Association dues (such as MLS, NAR, Chamber of Commerce, etc.)
Brokerage and franchise fees
2. Subscriptions
You might not need many subscriptions as a new agent, but the further you get in your career, the more subscriptions can help you manage your workflow. Some deductible subscriptions include:
Your Customer Relationship Manager (CRM)
Accounting software
Cloud storage
Industry news publications (like Inman or your local news source)
Additional software subscriptions (Adobe, MS Office, Canva Pro, DocuSign, etc.)
3. Training and Education
To incentivize professionals to continue their professional education, the government allows all professional training and education costs to be deducted. Here are some possible educational tax write-offs for real estate agents.
Seminars, workshops, and conferences
Coaching
4. Marketing
Most real estate agents spend about 10% of their annual income on marketing. It’s a substantial expense, so make sure you keep track of your marketing efforts so you can write them off.
Business cards
Flyers, brochures, and door hangers
Signage
Website launch and on-going maintenance
Postcards and other direct mailers
Social media ads
Other advertising (online ads, print ads, billboards, etc.)
5. Office Space Expenses
Office space expenses get a little confusing. Especially since many real estate agents maintain both a home office and a workplace office. Let’s look at these workspaces separately.
Workplace Office
All these expenses are tax-deductible for a workplace office:
Rent
Utilities
Insurance
Maintenance
Phone and Internet
Home Office
To qualify as a home office, your home office space must:
Be your principal place of business. Perhaps you have a rented office space you use for meeting clients, but your home office is where you do most of your work.
Be used regularly and exclusively for work (not a combination of work and personal use).
Be a full room (not just an area of a room used for other purposes).
If you have a home office, you can choose between taking the Simple Square Footage Deduction or Itemizing. If your home office space is 300 square feet or less, the simple deduction will likely be your better bet. But you can always calculate both methods to maximize your reduction each year.
Simple Square Footage Deduction
The IRS-approved per-square-foot deduction (just multiply your square footage by this rate to get your write-off amount). There is a limit on the amount of deduction you can claim under this method.
Itemized Deduction
Under the itemized deduction, you calculate the percentage of your home that your office takes up (your office square footage divided by your home’s full square footage). You can then apply that percentage to your home expenses to calculate your home office deductions. Unlike the simple per-square-foot deduction, there is no limit when using the itemized deduction method.
Mortgage interest and property taxes (if owned)
Rent (if rented)
Utilities
Repairs and maintenance
Security system
6. Equipment and Supplies Expenses
All equipment and supplies needed to efficiently run your business are also tax-deductible. These include:
Cell phone and phone service (the percentage used for business purposes only)
Computer and accessories (keyboard, mouse, webcam, headphones, etc)
Tablets
Lockboxes
Printer, scanner, and copier
Staging pieces
Office furniture and accessories
Stationary and postage
Ink and toner
All miscellaneous office supplies (sticky notes, pens, notepads, binders, etc.)
7. Transportation
Like home offices, transportation deductions can either be standardized or itemized.
Generally speaking, if you put 15,000 miles or more on your vehicle for the year, the standard deduction is your best bet. But many agents run calculations for both models each year and take whichever deduction reduces their taxes the most for that year.
Standard Mileage Deduction
The IRS-approved per-mile deduction (just multiply your work mileage by this rate to get your write-off amount)
Registration fees and taxes
Auto loan interest
Car washes
Tolls and parking
Itemized Deduction
Lease costs or auto loan interest
Maintenance
Gas and/or electricity
Tires and other replacement parts
Title, license, and registration
Car washes
Tolls and parking
8. Travel and Food
Real estate agents do a lot of traveling, but it’s mostly local. You drive buyers around, travel to a seller’s home for a listing presentation, or preview properties all over town.
But sometimes you need to travel further to meet with an out-of-area VIP client or attend a professional conference. In this case, you can write-off your necessary expenses.
Public transportation fees
Airfare
Lodging
Business-related meals (but only 50% can be written off)
Your business-related meals could also apply to your local travels. Treating a buyer to a pre-showing coffee or discussing a marketing strategy with a potential seller over dinner are legitimate write-offs. Just jot down a note about who you met with and what business topic(s) you discussed just in case you’re ever audited.
Also, if you noticed “entertainment” missing from this list, that’s not an oversight. Entertaining clients became non-deductible in 2018 due to the Tax Cuts and Jobs Act (TCJA) of 2017.
9. Professional Service Expenses
You’ll pay fees to lots of professionals in the service of your business. Here are several of the most common professional service expense tax write-offs for real estate agents.
Accounting fees
Photography fees
Staging fees
Appraisal fees
Legal fees
Business insurance fees
Private health insurance fees
Last year’s tax prep fee
Virtual assistant fees
Transaction coordinator fees
Business banking fees
Commissions paid to other professionals
10. Miscellaneous
Finally, there are a few tax write-offs for real estate agents that just don’t quite fit into the other categories. But that doesn’t make them any less deductible!
After-tax retirement plan contributions (like traditional IRAs or a solo 401k)
Refreshments for clients (water, Keurig, coffee, snacks, etc)
Rental property losses (for those who own income properties)
Closing gifts (only up to $25 per gift, and no more than one gift per recipient in a given year)
Referral gifts (only up to $25 per gift, and no more than one gift per recipient in a given year)
Quick note: before 2018, country club dues were deductible, but that is no longer the case due to the Tax Cuts and Jobs Act (TCJA) of 2017.
AceableAgent is Here for You!
Whether you’re looking to get your real estate license, complete your required continuing education courses, or get some online training to boost your business, AceableAgent has courses to help. And of course, all of our courses count as tax write-offs for real estate agents.