As long as your business expenses are “necessary”, “common and accepted” in your line of work, and “appropriate” for your business, the IRS allows you to deduct such expenses from your taxes.
For instance, a plunger might not be a good deduction for a photography company, but it would be for, say, a plumber. Here are some easy things that you can deduct on your taxes as a real estate agent, which can potentially result in thousands of dollars back in your pocket every year!
9 Best Expenses You Can Deduct as a Realtor
Realtor Tax Deduction #1: Insurance
As a realtor, you more than likely have professional liability insurance, otherwise known as errors and omissions insurance. This, along with other types of business insurance that are directly related to your real estate work, can be fully deductible on your taxes.
Realtor Tax Deduction #2: Licenses & Membership Fees
As a real estate agent, there are a number of potential licenses and fees that would fall under what the IRS considers tax deductible. For example, your real estate license is tax deductible.
You can also deduct the cost of professional memberships you are a part of, as well as your use of a multiple listing service (MLS).
Keep in mind that if you are deducting the dues of a professional membership, the portion of your dues that go into political lobbying and advocacy are not deductible. When you file for your taxes, you will need to make this distinction.
Realtor Tax Deduction #3: Commissions
If you pay commissions to your employees or associated real estate agents, you can deduct these as business expenses as well.
Realtor Tax Deduction #4: Mileage
As a realtor, you’re going to be on the road quite a bit. This can result in significantly more money in your pocket come tax time.
For every 1 mile you drive, you can deduct 65.5 cents using the standard IRS mileage rate for 2023. This rate takes into account the various costs of owning and operating a vehicle, including gas, depreciation, etc.
If you know you won’t be taking very many trips, you may be able to get away with pen-and-paper mileage logs, but these can be cumbersome and inaccurate. We recommend using a modern mileage tracker app like TripLog.
TripLog automatically starts tracking your mileage as you start driving, and stops when you stop, making tracking your business miles a breeze. You can even automatically exempt your commutes!
Realtor Tax Deduction #5: Marketing & Advertising
Virtually anything you spend on marketing and advertising that are directly related to your business can be tax deductible. This might include fliers, signs, photographs, and even digital paid ads like Google Ads.
Realtor Tax Deduction #6: Software
If you use computer software or apps to run your real estate business, you can deduct the costs of those products on your taxes. Think tools like Calendly, DocuSign, a CRM tool, or a mileage and expense tracker.
Realtor Tax Deduction #7: Desk Fees
Desk fees are the fees that you pay to rent a desk/space at your broker’s office. This can also include a co-working space.
Realtor Tax Deduction #8: Your Home Office
If you run your real estate business exclusively out of your own home (i.e. you don’t pay any desk fees), you can take advantage of the home office deduction. Keep in mind that the IRS is very strict about qualifying for this deduction.
Some of the things you can deduct a portion of include utility bills, internet costs, insurance, rent, mortgage payments, repairs, etc. Keep in mind that you can’t deduct your couch or a bedroom dresser you just bought whose usage has nothing to do with your business.
Realtor Tax Deduction #9: Office Supplies
Whatever supplies you purchase that are used directly in relation to your real estate business can be deducted. Office paper, clipboards, pens, all of these things can add up to a fairly sizable deduction come tax time.
This can also include things like furniture, a laptop, or a printer. Once again, the key aspect here is that you can directly tie the purchase to your business usage of it.
Realtors Get More Back on Their Taxes With TripLog
We hope you find the information in this article useful. Keep an eye out for other potential tax deductions as well!
Once again, one of the best ways for real estate agents to keep more of their hard-earned cash is to use a dedicated mileage tracking app like TripLog. With powerful set-and-forget automatic tracking features, you can rest easy knowing you’ll never miss a deductible mile.
Note: The contents of this article shouldn’t be taken as tax or financial advice. Please contact a CPA or tax professional if you have any questions regarding your business’s tax requirements.