REALTORS TAX DEDUCTIONS
A thorough knowledge of the tax codes should serve the Realtor well in understanding the Realtors' tax deductions available when he files his own tax return. Many Realtors are independent contractors. They are, in effect, owners of their own small business concern. As such, they are entitled to deduct almost all of their job related expenses as deductions against their income. Realtor professionals are eligible to deduct 100% of their Rental property loss. To qualify as a professional realtor at least one half of all the services rendered by the taxpayer must be in the area of Real Estate. They also must spend a minimum of 750 hours a year working at the Real Estate Business and the taxpayer must have materially participated in the providing of the service. When it comes to personal deductions, the IRS uses the terms ordinary and necessary. Ordinary and necessary refer to just about any expense that is common and appropriate. Such items as entertainment expense, automobile expense, and home office use are ordinary and necessary expenses for a Realtor. Entertainment expense has some special requirements before it can be utilized as a deduction. In the first place, only 50% of the cost of meals, etc, can be taken for any single event. THE BEST REAL ESTATE SYSTEMS RECOMMENDED VIEWING Below is a brief video from John Gualtieri, Head Coach at Mega Agent Makers. John is one of the very best coaches/trainers in the real estate business - I know from personal experience! He has allowed me to share one of his weekly Power Shot Videos - a free weekly video email service where he shares great tips and advice for growing your business. Have a look at the video below and perhaps you might consider signing up for his weekly newsletter. You'll get a lot out of it!
Realtor Tax Deductions - Cont'dThe Realtor generally works out of his automobile. As long as a certain portion of the automobile expense is called personal use and not part of the deduction, the remainder is a legitimate business deduction. If the automobile is driven home, that is considered commuting and is no different than any other worker who drives to and from work. However, all miles driven for work purposes are deductible. The deduction can be calculated either by keeping a record of the miles actually driven and using the per mile allowance determined by the IRS, or actually records of the expense can be kept.When the Realtor works out of his home, the rules for home office deductions apply. The best way to determine the amount of household expenses that can be used as a deduction is to calculate the total square footage of the home and then calculate the actual square footage of the office area. Be sure to include any space used for storage or for office machines. The percentage of the total square footage used for business purposes give you a percentage to use for household expenses. The Realtor has many tax deductions available and he should be knowledgeable enough about the tax laws and tax codes to minimize his own tax liability. The Realtor also can use his knowledge of tax law to evaluate the potential tax consequences of Real Estate transactions for both himself and his clients. 
AUTO TRAVELDocument business miles in a record book as follows: (1) give the date and business purpose of each trip; (2) note the place to which you traveled; (3) record the number of business miles; and (4) record your car's odometer reading at both the beginning and end of the tax year. Keep receipts for all car operating expenses- gas, oil, repairs, insurance etc.-and of any reimbursement you received for your expenses.
OUT-OF-TOWN TRAVEL
Expenses accrued when traveling away from "home" overnight on job-related and continuing education trips are deductible. Your "home" is generally considered to be the entire city or general area where your principal place of employment is located. Out-of-town expenses include transportation, meals, lodging, tips and miscellaneous items like laundry, valet etc. Document away-from-home expenses by noting the date, destination and business purpose of your trip. Record business miles if you drove to the out-of-town location. In addition, keep a detailed record of your expenses- lodging, public transportation, meals etc. Always list meals and lodging separately in your records. Receipts must be retained for each lodging expense. However, if any other business expense is less than $75, a receipt is not necessary if you record all of the information in a timely diary. You must keep track of the full amount of meal and entertainment expenses even though only a portion of the amount may be deductible.
PROFESSIONAL FEES & DUESDues paid to professional societies related to your profession are deductible. However, the costs of initial admission fees paid for membership in certain organizations or social clubs are considered capital expenses.
TELEPHONE EXPENSESThe basic local telephone service costs of the first telephone line provided in your residence are not deductible. However, toll calls from that line are deductible if the calls are business- related. The costs (basic fee and toll calls) of a second line in your home are also deductible if the line is used exclusively for business.
CONTINUING EDUCATION
Educational expenses are deductible under either of two conditions: (1) your employer requires the education in order for you to keep your job or rate of pay; or (2) the education maintains or improves skills in your profession. Costs of courses that are taken to meet the minimum requirements of a job, or that qualify you for a new trade or business, are NOT deductible.
EQUIPMENT PURCHASESRecord separately from other supplies the costs of business assets that are expected to last longer than one year and cost more than $100. Normally, the costs of such assets are recovered differently on your tax return than are other recurring, everyday business expenses like business cards, office supplies etc.SUPPLIES & EXPENSESGenerally, to be deductible, items must be ordinary and necessary to your real estate profession and not reimbursable by your employer.Create Your Own Realtor Tax Deductions WorksheetBelow are lists of Realtors Tax Deductions based on the categories I discussed above. Feel free to cut and paste these into an Excel worksheet for your future use.PROFESSIONAL FEES & DUESAssociation DuesLicense Chamber of Commerce Realty Board Other: OUT-OF-TOWN TRAVELAirfare Bridge & Hghway Tolls Bus & Subway Car Rental Lodging (Do Not Combine with Meals) Meals (Do Not Combine with Lodging) Parking Porter, Bell Captain Taxi Telephone calls (including home) Train AUTO TRAVELContinuing Education (mi)Escrow & Loan Office (mi) Out-of-Town Business Trips (mi) Client Meetings (mi) Showing Properties (mi) Parking Fees ($) Tolls ($) Other: Other: TELEPHONE EXPENSESCellular Calls Fax TransmissionsPaging Service Pay Phone Toll Calls CONTINUING EDUCATIONCorrespondence Course FeesCourse Registration Materials & Supplies Photocopy Expenses Reference Materials Seminar Fees Text Books Other: EQUIPMENT PURCHASESAnswering Machine Calculator Copy Machine Fax Machine Pager Telephone Computer Equipment Camera Recorder Other: SUPPLIES & EXPENSESAdvertising, Signs, Flag & Banners Appraisal Fees Attorney Fees Bank Charges Briefcase Business Meals (100% of expense) Business Cards Clerical Service Computer Software Car Rental Materials & Supplies Computer Supplies Courier Service Entertainment (100% of expense) Equipment Repair FAX Supplies Gifts & Flowers Greeting Cards Legal & Professional Services Lockboxes, Keys & Locksmith Map Book Multiple Listing Service Office Expenses Open House Expenses Photocopy Expenses Postage Rent Repairs to Sell Listed Property Shipping Stationary Other: THE BEST REAL ESTATE SYSTEMS RECOMMENDED Recommended Reading ListReturn from Realtors Tax Deductions to Home Page |
