Tax Deductible Operating Expenses for Real Estate Agents

By
Real Estate Sales Representative with Royal LePage / Pro Ledger Online Software

As a Real Estate Agent there are many types and kinds of operating expenses.  Rather than just list them all, it is best to understand the criteria of an operating expense.

 

Here is a chart that can that you can use as a guide:

Realtor tax deduction flowchart

 

A few tips to note:


Is It Ordinary
?  Is the expense common for your business?  If you are claiming something highly unusual for your business expenses it may be flagged and questioned by the IRS.  It is usually easy to identify the "ordinary' expenses.

Is It Necessary? Consider if it is helpful and appropriate for your business. It does not have to be indispensable but it need only help your business.

  • A FEW EXAMPLES: 
    Sam a Real Estate Agent installs a Cappuccino machine in the office to serve clients coffee when they come by on appointments.  Even though the coffee machine is not essential or indispensable it is "helpful" as some may value the coffee and may prefer it while doing business.

    Jessica a Real Estate Agent claims a handgun collection because of having to go to potentially unsafe locations to show a property. Such expenses have been by viewed by the IRS as "extraordinary" rather than "ordinary" to the usual and customary business.  For a case involving such a claim which involved other examples of disallowed deductions click here. (Samp v. Commissioner, TC Memo 1981-1986.)

Is It Business Related? An expense needs to be directly related to your business.  Having lunch with a friend or relative where the primary motive is personal and not the business is not deductible. If you use your cell phone only 50% of the time for business and the rest personal, you can only claim 50% of the phone bill as a business operating expense.

Is It A Current Expense?  These are expenses that are fully deductible in the year you incur them. Some expenses that last for more than 1 year, such as Capital Expense Items, may need to be depreciated over a number of years.  Such as a car purchase or other high priced items with a longer than 1-year benefit to the business.  For IRS details on Capital Expenses click here.


Our Products and Services:

** FREE tax deduction checklist for Real Estate Agents: click here
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** virtual bookkeeping services for real estate agents: www.myvirtualbookkeeping.com 


Note: This is general information to help you gain an understanding of U.S. tax laws. I am not a tax attorney or tax preparer. Please consult a qualified expert when you are preparing your tax returns or making tax-related decisions.

 

 

 

Comments (3)

Anthony Acosta - ALLATLANTACONDOS.COM
Harry Norman, REALTORS® - Atlanta, GA
Associate Broker

Good afternoon Steve Penner 

Thank you for sharing your informatin with us.

Have a great day 11/30/2017. 

Nov 30, 2017 03:00 PM
Steve Penner

you are most welcome ... thanks so much for the comment!

Nov 30, 2017 03:06 PM
William Feela
WHISPERING PINES REALTY - North Branch, MN
Realtor, Whispering Pines Realty 651-674-5999 No.

I see a lot of people with marginal deductions and if they get caught they will lose more than that saved

Nov 30, 2017 03:27 PM
Steve Penner

yes.. absolutely! ... essential to know the rules and stay "inbounds"... thanks for commenting :)

Nov 30, 2017 03:32 PM
Jim Cheney
Saint Francis Property Santa Rosa, CA - Santa Rosa, CA
Rincon Valley Realtor 707.494.1055

I probably under report my tax deductions because I don't want to get audited.  

Dec 02, 2017 07:24 AM
Steve Penner

... which is a very common concern... 

Dec 02, 2017 07:34 AM