We all know that tax season comes around every year and yet for most of us, it feels like 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!
Inflation and Tax Brackets
Inflation is a buzzword right now, and for good reason. You may see prices rising in your own 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 2021 filing:
Standard vs. Itemized Deductions
Simply put, a standard deduction will reduce your income by a set amount. Itemized deductions are broken down into categories and can be used to lower your taxable income as much as possible.
Here are the standard deductions for 2021 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 to you, including:
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 best.
We also want to remind you that the pandemic is still affecting taxes. And even if it doesn’t impact you personally, it may create changes for clients you’re working with. Things like Pandemic Unemployment Assistance, Recovery Rebate Credit (also known as stimulus checks), and the Child Tax Care Credit will need to be accounted for when taxes are being done.
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!
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