Now is the time of year when we all want to find ways to keep as much money in our pockets as possible come April 15th. For Real Estate Agents, tax time comes with many of opportunities to save, but only if you know which deductions to take. With that in mind, here are some commonly missed tax deductions every agent should look for when they file this year:
1. Internet Advertising
Whether you’re advertising for a listing or to attract customers, any money that you spend on advertising is deductible, and many real estate agents forget to deduct online advertising.
When you’re placing online or paying an online service to help distribute your ads across the web, remember to get a receipt or invoice from the site. Most sites have some sort of “Order Confirmation” screen when you place an order or pay a bill, and if you print a copy of the page or save it as an image or PDF file, this counts as a receipt.
TIP: Create a folder called “Vendor Bills” on your computer or in your e-mail box create and use it to save all of your online purchase receipts. That way they will all be in one place and easily accessible when you need them.
2. Automotive Expenses – More Than Just Gas
Being a real estate agent is such a travel-heavy job, so most agents know to deduct their gas and mileage expenses. However, there are other expenses that are deductible. At the top of the list of commonly missed deductions are parking and tolls. If you have to park anywhere, be sure to get a receipt so you can write it off.
It is also a good idea to write down the related client’s name on the receipt so you know where the expense came from. The same goes for any tolls that need to be paid during business travel.
TIP: Keep a travel log so you can record mileage and expenses that you incur during work based travel time.
3. Write-offs for Treating Your Clients Well
Taking care of clients is more than just a gift at the end of a transaction. And while gifts are deductible, so are other expenses you incur to make your clients happy, including business meals and any forms of entertainment used to “treat” the client. If you take a client to dinner, a show or sporting event, the cost is deductible so long as the expense is not considered lavish or extravagant. You also have to talk business at the meeting, you can’t just take a client out to a meal and talk about the game last night.
Meals and entertainment can be either 50% or 100% deductible, depending on the type of event. For more information, you can read up on the IRS rules for deducting meals and other expenses.
TIP: Have backup documentation such as receipts or invoices to ensure that the IRS will allow the deduction. The best possible documentation includes:
- Expense amount
- Reason for the Expense
- Date and time of the expense
- Names of the people you were with and your business relationship to them
- A receipt or invoice
4. Office Supplies
Business expenses are deductible, so just about anything in an office is fair game. Computers, electronics, and office supplies are the big ones, but there are more. For example, newspaper and magazine subscriptions are deductible if they are for your business.
Another deduction that most real estate agents miss is the postage deduction. Considering how many real estate agents still use mass and other mailings, this deduction can really add up, especially the occasional trips to the post office where you pay by cash. Be sure to document how much you spend so you can write it off at the end of the year!
TIP: Get in the habit of taking a picture of your receipts with your camera phone. You can then email them to yourself or use Expensify, a great free app for your smart phone that will turn your photos into expense reports in a few clicks.
If you have a home office, then you’re paying utility bills, and they can add up. Don’t worry though, utilities are deductible! So few people remember to claim their utility bills on their taxes! Make sure to keep track of your utility bills including electricity, water, and sewer expenses. For more home office deductions, check out the IRS Publication 587.