If you earn commissions as a real estate agent, you must file your taxes as an independent contractor. You are entitled to deduct expenses related to generating your commission income. Report your self-employment income and deductions on Schedule C. Keep all receipts for the deductions you claim in case the IRS needs to audit your return in the future.
If you use your personal vehicle to show homes, prepare for open houses or meet clients, you can deduct some of your costs as business expenses. You may choose to deduct the IRS standard mileage rate (which it publishes regularly) or the actual cost of your gas, oil and repairs. If you choose the actual cost method, you can also deduct a depreciation allowance according to the table in the IRS instructions. Keep a log that lists the date, miles driven, destination and the reason for each trip. Under the actual cost method, you must pro-rate your expenses if you also use the car for personal driving. Registration, license renewal, tolls and parking fees are deductible under both the standard rate method and the actual cost method.
You may deduct the cost of acquiring your real estate license, renewals and continuing education classes. Membership fees for your local Chamber of Commerce, as well as subscriptions to trade magazines or newspapers in which you place advertisements for your properties, are also deductible. To stay updated on current real estate laws and the latest technology to assist agents in listing and marketing properties, you may be able to deduct travel to conventions, registration fees and lodging.
Advertising is crucial to your success as a real estate agent. The key to selling properties is to get your listings in front of as many potential buyers as possible. You may deduct the cost of advertising in print, online, radio, television, billboards and other media. Welcome gifts after the sale are deductible as long as they are reasonable, such as flowers, champagne and other small housewarming gifts. Meals with clients may be deductible if you are discussing issues related to your real estate business. Postage for direct mail advertisements, website development and hosting costs are considered part of your deductible marketing expenses. Real estate agents may also deduct open house expenses including food and beverages served at the event, marketing costs, and wages paid to staff members to work the event.
Office rent, telephone bills, fax lines and Internet connection fees are deductible. If you work from home, you may deduct a portion of your mortgage, utilities, property taxes. Calculate the percentage of the house used for business purposes and multiply your expenses by this percentage. You may also deduct the cost of office equipment such as computers, printers, envelopes and paper.
Premiums for health insurance, liability and errors and omissions insurance are deductible as business expenses. You may also deduct your contributions to a qualifying tax-exempt retirement plan. You may deduct accounting expenses, legal fees, referral fees paid to acquire new clients and commission rebates given to other real estate agents.
- Comstock/Comstock/Getty Images
- What Can I Expense on My Taxes?
- Am I Allowed to Claim Fuel on My Taxes?
- Can 1099 Employees Deduct Car Expenses on a Tax Return?
- Can I Claim Expenses When Flipping a House?
- How to Claim Unreimbursed Mileage
- What Items Qualify as Deductions on Your Tax Return?
- Tax Planning for Self-Employed Truck Drivers
- Can I Deduct Mileage to Doctors & Pharmacies for Tax Deductions?