The Tax Deductions Realtors Need in 2024

We all know that tax season comes around every year, and yet, it sneaks up on us out of nowhere! For Realtors, you’re doing double duty during tax season as you help not only yourself but your clients, as well.

Since you’re considered self-employed, taxes are a bit more complicated than for a standard worker. But don’t worry; this handy guide will help you stay stress-free as you file!

The Basics

• You can file between January 29 and April 15, 2024.
• You can file for an extension by April 15, 2024.
• Taxes with an extension must be completed no later than October 15, 2024.
• Refunds have no guaranteed timelines, but you may see your refund more quickly if you file electronically and use direct deposit. If you received Earned Income Tax Credit or Additional Child Tax Credit, the law states that your refund cannot be processed until at least the middle of February.

File for Free: The IRS is piloting a new program this year that aims to help Americans file their taxes directly to the government for free. Called Direct File, the pilot will only be open to people who lived in these states in 2023: Arizona, California, Florida, Massachusetts, Nevada, New Hampshire, New York, South Dakota, Tennessee, Texas, Washington, and Wyoming. Click here to learn more.

If you are not eligible for the pilot, you can still file your taxes for free with IRS Free File. You must make less than $79,000 a year. Click here to learn more about Free File.

Inflation and Tax Brackets

Due to inflation, you may see increased prices for your cost of living, or you may have clients concerned about it as they try to buy a home. Luckily, the IRS takes inflation into account, and tax brackets are adjusted to reflect the current state of the economy.

Speaking of tax brackets, here’s what they look like for 2023 filing:

Itemized deductions include health insurance, medical bills, Health Savings Account (HSA) contributions, energy-saving home improvement, state and local taxes, student loan interest, educational bills like tuition, mortgage interest, electric car credit, donations to non-profits, and business expenses.

Business Expenses for Realtors

It’s crucial to remember that even if you work with a real estate firm, real estate agents are considered self-employed when it comes to taxes. It is best for you to use itemized deductions following the guidelines of the Path Act and we highly encourage you to work with a professional to maximize those results.

While there are limits to deductions, there are many write-offs allowed:

• Continuing Education: Attending conferences and trainings helps you to stay ahead of the curve as a Realtor. Make sure you’re deducting things like registration fees and course materials.
  
  
• Home Office: If your home office is your primary place of business, then you may be able to make deductions on the costs of items used in it, such as your desk, writing supplies, printing supplies, etc.
  
  
• Marketing Costs: Growing your clientele includes marketing yourself. Whether you’re doing that through ads on social media, hosting a podcast, or going old school with print advertising, those expenses can typically be written off!
  
  
• Closing/Partner Gifts: Showing your clients and partners you value them is a big part of your job, and a great way to do that is with a gift! You can deduct up to $25 from the gifts you give.
  
  
• Auto Maintenance: Working with home buyers and sellers means driving (and driving means auto expenses). So, you have two options: standard auto deduction or standard mileage deduction. Find out whether it would benefit you more to write off your mileage or your expenses and go from there!
  
  
• Licensure: You know the importance of keeping your license up-to-date and paying your memberships on time. Check with your accountant to see what can be deducted from your taxes.
  
  
• Productivity Software: Any software or app you need to run your business is fully tax-deductible.
  
  
• Travel: When you travel for education, training, or events, you might be able to write it off as a business expense.
  
  
• Commissions: Did you know the commissions you pay out to people on your team are deductible? Work with your tax professional to see how that can be itemized for you!
  
  
• Food: Taking a client out to dinner is a business expense, and so is eating while traveling. Up to 50% of the cost of food can be deducted.
  
  
• Desk Fees: If you aren’t using a home office and are instead working in an actual office, you can write these fees off.
  

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Things to Remember

We can’t stress enough how important it is to follow IRS Guidelines when it comes to business expenses and to always work with a tax professional for the best results. There are limits to what can be deducted from your taxes, and a professional will know the ins and outs.

Many tax credits are going back to 2019 levels, mostly those that were adjusted due to the pandemic. This includes the Child Tax Credit, Earned Income Tax Credit, and the Child and Dependent Care Credit. The one that will have the biggest impact is the Child Tax Credit. If you received the higher credit of $3,600 last year, you would now receive $2,000 per dependent (if eligible).

As a real estate professional, the tax records you keep are important. The more information you can provide to your accountant, the better it will be for you and your business. Remember, this article is just a guideline, and Churchill Mortgage does not provide tax advice. What we can provide for real estate agents is partnerships that are rooted in helping your clients have the best home buying experience possible. Reach out to learn more!

The information contained herein is general in nature and based on authorities that are subject to change. Churchill Mortgage guarantees neither the accuracy nor completeness of any information and is not responsible for any errors or omissions, or for results obtained by others as a result of reliance upon such information. Churchill Mortgage assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect information contained herein. This publication does not, and is not intended to, provide legal, tax or accounting advice, and readers should consult their tax advisors concerning the application of tax laws to their particular situations.