The Top 10 Tax Deductions for Realtors

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!

The Basics

• You can file between January 24 and April 18, 2022.
• You can file for an extension by April 19, 2022.
• Taxes with an extension must be completed no later than October 17, 2022.
• Refunds have no guaranteed timelines, but you may see your refund more quickly if you file electronically and use direct deposit.

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:

• Single: $12,550
• Married and jointly filing: $25,100
• Head of Household: $18,800

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:

• 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 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 of 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 on your taxes!
• Travel: When you travel for education and trainings or events, it may be able to be written 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, as is eating while traveling. Up to 50% of the cost of food can be deducted on your taxes.
• Desk Fees: If you aren’t using a home office and are instead working in an actual office, you can write those fees off.

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!