Tax Savings: Organize Your Real Estate Income

It’s important to organize your real estate income and expenses so that you don’t overpay at tax time.

The key to savings at tax time is to know which deductions realtors are most likely to miss and organize them by category for your accountant. Accounting software programs like QuickBooks and FreshBooks will help you keep good self-employment records. Don’t rely on the software 100 percent; organize your expenses within these deduction categories so that you can take full advantage of deductions.

Memberships and Meeting Fees

You probably deduct the cost of industry membership dues, such as your local real estate association and national association fees. Did you know that you can also deduct a portion of these memberships on your tax returns?

• Price Club Memberships (Costco, Sam’s Club, or BJ’s).
• Meal and Meeting expenses for networking events.
• Club dues for networking events (Chamber of Commerce, Lions Club).

Note: Certain clubs/memberships are not deductible if their sole purpose is entertainment. See IRS.gov for more information.

Home Office Expenses

Most Realtors take advantage of home office write-offs, but they limit the deduction to the simplified square footage calculation. When gathering your home-office write-offs, don’t forget to include these notes:

• Include the storage area square footage that you use to keep your real estate signs and staging inventory.
• Whole-home services. If your home requires pest control services, heating or cooling system repairs, or roof or window repair/replacement, you can deduct a percentage of these services.

Entertainment Expenses

A good accountant will help you take advantage of the standard meal deductions but don’t miss out on entertainment-related expenses. For example, if you spend the afternoon with a relocation home buyer who happens to love baseball, you can deduct a portion of the ticket cost. As long as you conduct business with the person you are entertaining during, before, or after the qualifying event, you can deduct up to 50 percent of the entertainment costs. Learn more in the Publication 463 section.

Online Research and Education

You already deduct your continuing ed and licensure classes, but did you know that you can deduct books, materials, and online classes? Have you paid for an online Facebook marketing class or a blogging course? Keep records of ALL education expenses, including online courses.

Credit Card Interest

Do you use a credit card to float business expenses? Keep track of credit card purchases that are used for business and ask your accountant about the interest deduction.

Subscriptions

Do you pay for magazines with home-related themes (HGTV), consultant newsletters, or industry news? Bookmark the fees for a deduction.

Website and Digital Asset Fees

Do you pay hosting fees for a real estate website? Did you buy WordPress plugins this year? What about digital memberships to directory sites? Keep a record of everything that you purchase online, as it may be eligible for a deduction.

Start-Up Fees

Fees associated with starting a real estate team under a new name or launching a home-staging service along with your real estate services may fall under start-up deductions. Keep this deduction in mind if you are thinking of changing brokerages and starting a new business model. Keep records of all expenses and discuss them with your accountant.

Your real estate business is likely to generate higher-than-average income than most self-employed professionals. Staying up to date on tax law changes and keeping organized records on out-of-the-box deductions will help reduce your tax burden.