A Realtors Checklist of Tax Deductions

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Michael Lodge  By Michael Lodge

Realtors work a lot of long hours to receive those commissions on the sale of real estate.  So let’s talk about tax deductions you can take as you work those long hours.

What can you deduct?

There are so many possible tax deductions for real estate professionals.  Any expense for your real estate business is deductible if it falls into the following category –

–  ordinary and necessary
–  directly related to your business
–  reasonable in amount (IRS Code Section 162)

An expense doesn’t have to be indispensable to be necessary, it just need to only help your real estate business in some way – even if it’s a minor way.  A one-line expenditure can be ordinary and very necessary for your real estate transactions to happen.

But – you cannot deduct personal expenses.  For example, the cost of a personal computer is a deductible operating expense only if you use the computer for business purposes; it is not deductible if you use it to pay personal bills or play computer games.  You have to show that this computer is only for the purpose of conducting real estate business, transactions, using the MLS, submitting offers – the list goes on.

If you purchase something for both personal and business use, you can deduct only the part used for business of the expense.

CHECKLIST OF DEDUCTIONS

  1. Advertising expenses, including websites, mailing lists, newspaper advertising, fliers, online advertising, postcards, promotional materials, logo clothing, and anything else you pay for the purpose of marketing your business.
  2. Bookkeeping, accounting and legal fees – tax preparation
  3. business gifts (up to $25)
  4. business meals and entertainment (subject to the 50% rule)
  5. cab fares for business travel
  6. car and truck expenses, including business mileage, depreciation, insurance, interest on car loans, lease payments, license plate fees, parking expenses, and tolls
  7. Cell phones
  8. Computer software
  9. Computers
  10. Desk fees
  11. Education to maintain or improve required skills (but not courses you take to pass the real estate licensing exam)
  12. Home office expense (if you qualify)
  13. Insurance, including health insurance, errors and omissions insurance, business liability insurance, and business equipment insurance
  14. Interest, such as interest for business loans, interest paid on business credit cards
  15. Internet access fees
  16. Map books or online map services
  17. office equipment (cost may be deducted in one year using bonus depreciation or IRC Section 179)
  18. Office expenses, including rent, cleaning and maintenance and utilities
  19. Office supplies
  20. Postage
  21. Professional dues and fees – for example, MLS dues and dues paid to the local Chamber of Commerce, Realtor associations, and real estate license renewal fees
  22. Referral fees and commission rebates
  23. Retirement plan contributions
  24. Subscriptions to professional journals
  25. Real estate franchise fees
  26. Taxes, including payroll taxes for employees, state and local business taxes
  27. Telephone service fees
  28. Travel to business conventions, including transportation, lodging and food
  29. Wages and benefits paid to employees.

If you have any questions please send them to:  tax@icontaxgroup.com