How Realtors Can Reduce Their Taxable Income

Tax Professionals aren’t the only ones looking to save you money in all the right ways, as bookkeepers, we are also searching for ways to save your hard earned money. There are many ways to save whether that be investing in your retirement account or spending money to save money. Yes, you heard that right, if you are already spending your money, why not spend it on the right things and in the right ways to write it off as an expense to your business?

One thing most realtor’s don’t consider as a write off is travel outside of the usual trips to each listing or potential listing. If you’re planning a vacation, why not strategize and find a few real estate conventions, seminars, or meet with potential clients while you’re there? Of course speaking with your CPA or tax advisor can help you learn how to stagger these events perfectly so you can write them off properly. Some things to consider are, reserving travel days for just that, travel. Travel days are considered business days in the eyes of the IRS, so the day you travel to your business vacation and the day you travel back from your business vacation are considered business days, even if you choose to leave early and enjoy the rest of the day by the pool. You can deduct expenses on your trip as long as half of the days are business related, so with strategic planning you can make a write-off of your entire trip. Some things to consider for writing off is travel, such as airfare or mileage, hotel stay costs and fees, a percentage of your meals, and seminar or convention fees. It is important to find the best method that works for you, but by planning your work schedule at the beginning and end of your trip, you will make your vacation considered a business vacation. Who doesn’t love a little vacation time, while incorporating some work that can help save you taxable income?

Another thing to consider when trying to reduce your taxable income as a realtor, is your food expenses. When you meet clients over lunch, usually only half of the cost is deductible, but if you’re hosting an open house, here are some things that you have full write-off capabilities on; food/catering services, promotional pamphlets and goods, entertainment, that candle you love to light before the crowd starts flowing in or that front door mat that may or may not have your business logo on it. There are so many things to consider when hosting events like these, so be sure to connect with your tax professional if you have any questions regarding what is and is not considered a business expense.

There are so many perks to owning your own business, and the great thing is, even in real estate, there are many ways to find deductions. As we discussed before, travel can be a huge expense for Realtors, but usually the only thing people think about is only recording their mileage. Aside from mileage, you can deduct other costs associated with your vehicle like oil changes, maintenance and repairs, depreciation, and even tolls/parking. Keeping track of these expenses could save you quite a bit of money. So don’t forget to log your mileage, save receipts for any maintenance and repairs, and keep track of any tolls and parking.

In most cases, realtors have a home office since they are on the go and typically meet clients elsewhere for consultations, whether that be for coffee or at their place of residence. That being said, don’t forget to consider taking your home office as a possible deduction if you only have an office at home, or you spend the majority of your office time in your home office. Speaking with your tax professional can provide better guidance for your individual circumstances. There are some expenses that are fully deductible, like office supplies or equipment costs, but there are other costs that may only be partially deductible, such as a cleaning service or some maintenance and repairs. Either way, as the saying goes, “a penny saved is a penny earned” when it comes to tax deductions.

In conclusion, it is always a good idea to consult with your CPA or tax professional to determine the ways you can save money for your real estate business. Keep in mind, everyone’s tax situation is different. The more you know about what deductions may be available to your business, and creating strategies to evolve your business, the more money you can place back into your pocket. 

*Disclaimer: information provided in this post is strictly provided as informational and educational purposes only and should not be substituted as professional or personalized tax guidance.