6 Tax Tips for Real Estate Agents

Take control of your finances by equipping yourself with these top tips


If there is one thing that’s guaranteed to unite real estate agents across North America, it’s the shared dread of tax season. That churning feeling in the pit of your stomach when you realise that you have to sort through a year’s worth of expenses and receipts? Horror at the prospect of forced mathematics? That cold shiver that runs down your spine and fills you with dread when an email from your accountant drops into your inbox? We feel your pain.

The good news is that you can wrestle back control of your acid reflux and finances by equipping yourself with some top tax tips for realtors. Follow our lead and we guarantee that rather than dreading the spreadsheets full of numbers, you’ll relish the chance to put your new found account prowess to great use making more of your money. And by that we mean arming yourself with our top tax tips and putting the lessons into practice…

1. Start a Journal

While it’s not real estate specific, every realtor we know can benefit from keeping a journal. Rushing around from viewing to viewing, writing listings, answering a busy phone and dealing with buyers sellers and solicitors can make days hectic to say the least. Starting a tax journal means no expense will ever be missed or overlooked – you can pick a tax journal up from the stationary store. Use it to record expenses as and when they occur.

A common mistake made by many small businesses is that they forget that any expense needs to be backed up by burden of proof so if it goes in the journal make sure your original receipt is also stored in a safe place such as a folder at the office. Get into the habit of pinning the proof into the journal when you record each item and then transfer to the folder when you make it back to base. This way you won’t lose vital receipts under the car seat, in the truck or stuffed in a pocket.

2. Know your deductions

Legal expert and author Stephen Fishman – who has penned a number of books on tax issues for real estate professionals- advises all realtors to know what they can and can’t deduct for. He advises that if you’re a self employed realtor, you may be missing out on a bunch of reductions. For example, you probably know that you could claim office rent back but did you know the same is true if you work from home? If you have a home office, you can deduct a portion of the rent / utilities from your tax return. If you rent your place, this can add up to a big saving in more ways than one.

Likewise, as a business you can claim back business insurance but as a self employed realtor, you can deduct 100% of your health insurance. You can also deduct a portion of your house insurance.

This tip also works the other way around and it’s just as important to know what you can’t deduct so you don’t go spending a huge chunk of cash only to find you have to foot the bill. If you’re trying to secure a particularly attractive listing, you may decide to wine and dine the owner. Be aware that you will only be able to deduct 50% of the cost of entertaining a business associate.

3. Be Smart About Standard Mileage

To deduct the cost of your vehicle expenses from your tax return you have a couple of options. The first involves super diligent record keeping down to the last kilometre, every parking ticket and last cent spent on every wash and oil change. Option two means you can work smarter not harder – the standard mileage rate is your friend. From Jan 1st 2014 the standard mileage rate for business use is $0.56 cents per mile according to the IRS.

4. Remember Advertising is Deductable

Any services you engage to help market your business online – including CityBlast’s social media solutions for real estate agents – are tax deductable. Just store your invoices when they come through add tally up at the end of each quarter.

5. Record Office Supplies

Any office supplies you need to carry out your work are tax deductible, from the paper you print contracts on, the computer you use to send emails and the stapler you use. You may think that buying a toner cartridge here or a few folders there makes no difference but if you add up all of the little bits you get through each month you’ll find they amount to a big difference that many realtors simply overlook. From envelopers to post its, flash drives to printers, it is all tax deductible.

6. Don’t leave tax until the last minute

With daily life so hectic, tax is often one of those things that is put off until it absolutely has to be dealt with. This can mean that the amount of tax you have to pay is an unpleasant surprise or that refunds are slow to be claimed. If you don’t have enough time to compile everything you also risk racking up fines. Experienced CPA Lisa Cahill has spent more than two decades managing accounts and tax issues for realtors. In her 2013 – 14 tax tips video, she advises real estate agents to find an accounting software tool that you are comfortable with such as Quickbooks and get into the habit of using the reports and charts it provides to keep up to date about the status of your business.

Wrapping It All Up

There is a lot to think about when it comes to tax, from knowing what you can and can’t claim back to getting to grips with new jargon and a seemingly endless supply of rules and regulations. What’s clear from these tips is the importance of staying on top of tax tasks. Even setting aside thirty minutes once every two weeks will leave you with a much clearer and accurate idea of where your business stands and what your tax liabilities are. Being prepared – not just for boy scouts.

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