While today’s blog is primarily directed to new Real Estate Agents, it may be helpful to experienced ones as well. We’re going to give a few quick tax tips to New Realtors.
Taxation for New Real Estate Agents can be very confusing. Many new agents come from an environment where they received a Form W-2, had their taxes auto withholdings automatically, had very few expenses that they could deduct on their tax return (if any), and didn’t need to worry about tracking those expenses.
The tax responsibilities and opportunities in their new positions can be overwhelming. However, I also meet experienced agents, who are excellent and successful at what they do, but have neither the time nor the interest in exploring these tax issues. Below we’ll cover a few of these.
What Can You Deduct?
I get this question a lot. The IRS states that for an expense to be deductible, a business expenses must be ordinary common and accepted in your trade) and necessary (appropriate for your business). For a Real Estate Agent, these expenses may include, but are not limited to:
- Expenses Related to the Use of Your Vehicle. There are two options –
- The Actual Method
- The Mileage Method
- Home Office Expenses
- Broker Charges
- Advertising and Marketing
- Computer and Phone Costs
- Business Meals
- Business Travel
- Expenses Related to Showing a Property
- License and Dues
- Business or E&O Insurance
- Other Ordinary and Necessary Expenses
Responsibilities and other Issues to Keep In Mind
Here are some tips I give to all Real Estate Agents:
- Keep your business transactions separate from your personal transactions. Use a separate bank account and credit card. This will be to your benefit in making sure you capture all of your expenses as well as if you are audited down the line.
- Track your expenses using bookkeeping software or other methodology that works for you. If you follow tip #1, it will make bookkeeping much easier.
- Use an app to log your mileage. At the end of the year, you’re going to find it impossible to remember where you drove. Track it as you’re driving.
- Make Estimated Tax Payments. This is the area where I see new Real Estate Agents get into trouble. Estimated tax payments are due quarterly but I recommend that you pay estimated tax payments to the government when you receive commissions. By the time the estimated tax payment due date comes, your money may be gone. How much should you have withheld? Take a look at my earlier blog where I cover this topic in more depth
If you are a new or experienced Real Estate Agent, or other Small Business owner, who needs professional help with your taxes, keeping your books properly, or dealing with any IRS issues, give me a call at (972) 821-1991 or send me an email at firstname.lastname@example.org. Learn more about us at https://jablonskyandassociates.com/real-estate/