The average annual business expense for a typical real estate agent is around $6,500. However, expenses for top-performing agents can go beyond $10,000. Properly tracking and deducting all eligible business expenses is crucial as it helps prevent a reduction in net income and take-home pay due to overpayment of taxes. Tax time is incredibly stressful for agents and nearly all want to improve their processes for tracking income and expenses.
That’s where Symba comes in. Symba takes away the administrative burden of being a real estate agent. From deal tracking to bookkeeping and taxes, Symba makes your entire workload seamless and stress-free. In addition to our app Symba, we wrote this list of business expenses real estate agents can deduct come tax time.
Education And Training
- Training
- Mandatory Continuing Education
- Audible Subscription (if used for business purposes)
- Real Estate Agent Books
- Online Courses
- Coaching
Automobile And Transportation
You have two choices when claiming a vehicle tax deduction.
Simple Method (Standard Mileage Deduction)
The simple method is where you take a cost per mileage driven for business.
For 2023, the standard mileage rate is 65.5 cents per mile.
If you drove 15,000 miles, you could deduct $9,825.00.
Complex Method (Itemized Deduction)
The more complicated method is to itemize the expenses made throughout the year to maintain and service your vehicle. Should you go with the more complex method, here are the different deductions you can claim:
- Maintenance
- Gas and Electricity
- Parking
- Lease Costs
- Car Washes
- Interest on Auto Loan (not the payment itself, though)
- Tires
- Title
- Licensing
- Registration
- Depreciation
Travel
- Airfare
- Travel
Home Office Deduction
Your office must be 100% dedicated to being your office. You cannot set up a dual-purpose setup or have your computer in the corner of your bedroom, etc.
The home office deduction is on an “honor roll” type of system but is prepared in the event of an audit so that you can prove that you used the space entirely for business and nothing else. There are two ways in which you can receive the deduction.
The simple method is to multiply the room’s square footage by $5 (maximum of $1500). An example would be a 150-square-foot room that you use exclusively as your office. Multiplying that by $5 gives you $750 you can deduct from your home office.
The complex method is where you itemize related costs associated with your home and multiply them by the percentage of the house that you use for your office.
These related costs include:
- Insurance
- Mortgage Interest/Rent
- Property Tax
- Repairs/Maintenance
- Security System
- Utilities
Office Rent And Utilities
- Office Utilities
- Renters Insurance
- Maintenance on Rental
- Internet Service
- Phone Service
- Office Rent
Gifts ($25 Deduction Limit)
One way to solve this problem is if you can add your branding to the gift. The gift then becomes marketing and has different requirements. Therefore, a higher deduction would be allowed compared solely to a gift.
- Gifts
Sales Tax Deductions
As real estate agents, we often find ourselves in unique situations that require unusual solutions. If these solutions require money, you may be surprised to find them as tax deductions for real estate agents. Here are some of the things that I’ve paid for over the years that I was able to realize as tax deductions:
- Appraisal Fees
- Termite Inspection Fees
- Closing Attorney Fees
- Concessions
- Courier Services/Delivery Fees
- Finder Fees/Referral Fees
- Repairs on a Listed Property
- Home Warranty
- Inspection Fees
- Notary Fees
- Open House Expenses
- Photography
- Staging Fees
Business Equipment Expenses
- Calculator
- Camera and Lenses
- Cellphone
- Cleaning Equipment
- Computer
- Equipment Repair
- Spare Keys
- GPS
- Hard Drives
- iPad or Tablet
- Lock Boxes
- Maps
- Printer
- Scanner
- Staging Items
- Measuring Equipment
Office Supplies
- Client Refreshments (Coffee, Water, etc.)
- Copier Fees
- Cleaning Services
- Office Furniture
- Bookshelves
- Chairs
- Desks
- Filing Cabinets
- Envelopes
- Folders
- Paper
- Pens
- Postage
- Toner/Ink
- Stationary
- Speakers
- Televisions
- Cloud Storage of Business Files
Employees
- Transaction Management
- Family Wages
- Payroll and Unemployment (FUTA) Taxes
- Showing Assistant
- Real Estate Virtual Assistant
Legal Or Professional Services
- Tax Professionals
- Legal Professionals
Meals
Be sure to document who you ate the meal with and a sentence or two about what you discussed. The Consolidated Appropriations Act, 2021 amended the Code to add another exception that temporarily permits a 100% deduction for “food or beverages provided by a restaurant” for expenses paid or incurred in 2021 or 2022. In 2023 the deduction amount returned to 50%.
- Meals
Insurance
- E&O Insurance
- General Business Insurance
- Private Health Insurance (talked about more later)
- Auto Insurance
Services & Fees
These monthly recurring fees add up by the end of the year. If they are charges that facilitate your real estate business, chances are they are deductible expenses.
- Business Bank Fees
- Bookkeeping Fees
- Business Licenses
- Interest on Business Purchases
- Ongoing App Subscriptions
- Internet Service
- Cell Phone Service
License & Dues
- NAR Dues
- Association/Board Dues
- Brokerage Fees
- Desk Fees
- Royalty/Franchise Fees
- MLS Dues
Marketing
- Open House Signs
- Listing Yard Signs
- Listing Flyers
- Business Cards
- Website Development and Maintenance
- Direct Mail
- Advertisements on Google and Social Media
- Management Costs for Running The Ads
Self-Employed Health Insurance
- Self-Employed Health Insurance Premiums
Software
- CRM
- Accounting & Bookkeeping Apps (Symba)
- Business Management Software (Symba)
- Deal Tracking Software (Symba)
- Lockbox Software
- Other Business Software
Retirement Plan Contribution
- Self Employment Pension (SEP) IRA
- Solo 401k
- Traditional IRAs
Tax time is never fun but with the right planning and resources you can save money and make it a lot less stressful. If you’re in search of a CPA you can set-up a call with us here and we can help. Hopefully this guide is a helpful tool for you in 2023!
Disclaimer: The information contained in this document is provided for informational purposes only and should not be construed as financial or tax advice. It is not intended to be a substitute for obtaining accounting or other financial advice from an appropriate financial adviser or for the purpose of avoiding U.S. Federal, state or local tax payments and penalties.
