As a real estate agent, you are considered self-employed by the IRS. This applies even if you are working for a real estate brokerage firm. As a self-employed sole proprietor, you are eligible to many business deductions that you incur in your real estate sales activities. In order to claim these business deductions and to maximize your tax savings, it is very important to keep good record keeping. Also, with changing tax rules its also important to be aware of the major tax deductions that are available for your profession.
In order to qualify as a deduction, the business expenses are required to be considered ordinary, necessary and directly linked to your business.
Here are few common and important business deductions that may apply to you :
1) Continuing education, training and coaching fees.
2) Home office deduction: If you used your home partially for business, you are eligible for the home office deduction. There are two approved methods simplified option method and the regular method. Under simplified option method, you are eligible to take up to a maximum of 300 square feet @ $5 per square foot. Under the regular method, you can prorate the percentage of the home used for business. You may choose either simplified or regular method for any taxable year.
3) Real estate licensing and renewal fees.
4) Meals & entertainment, travel airfare, lodging etc for your education or business purposes.
5) Multiple listing services, brokerage fees, and association fees.
6) Cell phone expenses prorated for business purposes.
7) Holiday and special promotional gifts to customers. There is a limit of $25 per customer.
8) Chamber of commerce dues.
9) Vehicle mileage or actual expenses: For 2017, you can deduct up to 53.5 cents per mile for business miles or you can choose actual expenses incurred on your car. Eg: Gas, repairs, and maintenance etc.
10) Marketing activities- advertising on social media, newspapers, flyers & brochures etc.
11) Professional liability or general liability insurance costs you paid for your business.
Record keeping basics & tips for real estate agents & brokers
1) Keep copies of all bank statements and credit card statements
2) Keep receipts for all your business expenses including mileage log. Also, include a brief description of the event or client appointment
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