We know tracking your expenses for tax time can be time-consuming and usually a bit confusing!
In order to get the most out of your business, we put together a cheat sheet of the top tax deductions real estate professionals can take advantage of for the 2019 season (get your receipts ready!):
1. Advertising Expenses
Common advertising expenses include investments such as business cards, social media ads, paid subscriptions, flyers, and any other collateral you use to market your business to potential clients. These must be used purely for business purposes.
2. Car Expenses
These are the expenses directly related to mileage, parking, and tolls. You will want to ensure you track everything you pay for while doing showings, leading up with clients, and closings. Mileage is a huge expense that a lot of professionals do not track (and are leaving money on the table because of it!). If you are using your personal car to meet with clients or prospective clients, then you will want to track your mileage. There is a great mileage tracking app called MileIQ that does the hard work for you.
3. Contract Labor
If you use contractors to help in your business like a photographer or virtual assistant, then those expenses are also deductible. Many real estate professionals buy their own camera, lighting, and stagings for showings, so if you purchase these for your business, deduct them at the end of the year either through depreciation or a Section 179 deduction.
4. Meals & Entertainment
Meals with current clients or prospective clients are also deductible! However, the meals deduction is only up to 50% of the expenses that you paid. For example, let’s say you meet a current client or a prospective client at a Starbucks, and you purchase coffee for them. Only 50% of that cost is deductible. Also, you must include whom you were meeting and business purpose discussed.
5. Client Gifts
Most real estate professionals like to purchase a gift at closing for their clients. As of 2019, you can only deduct up to $25 per client for gifts, even if the total price of the gift exceeds that amount. Couples are considered one client! However, there are different ways to file these gifts as advertising costs. Make sure to speak with your accounting professional on what is best for your unique situation!
6. Continuing Education Fees
These expenses can include conventions, seminars, and conferences that you attend. If you are trying to maintain your license or improve being an agent, any of those expenses are also considered deductible. The travel and lodging (if they are necessary) can be deducted here as well.
7. Annual Dues or Franchise Fees
Many real estate professionals pay franchise fees to their brokerage firms – make sure you track these to prepare for tax time!