What Can You Write Off as a Real Estate Agent?

Most real estate agents work as independent contractors, so they can deduct ordinary and necessary business expenses on their tax return. Common write-offs include vehicle use for showings, marketing and advertising, MLS and association dues, licensing and continuing education, a qualifying home office, phone and software, and fees or commissions paid to others. Good records are what make these deductions hold up.

Tax Deductions for Real Estate Agents

As someone who works in the business and real estate world, understanding what items you can write off on your taxes can be a game changer. It can help maximize your income while minimizing your taxable income.

At Cooper Norman, we understand that managing your own finances while being your own boss can be challenging and time-consuming, We are here to lift that stress off your shoulders, while providing accurate and insightful information for your taxes. This blog will discuss the items you can deduct from your taxes to help you remain financially healthy as a real estate agent.

Primary Tax Deductions

You may or may not use all these things as a real estate agent, but here are the most common items you can write off on your taxes.

1. Home Office

If you decide to make a designated office in your home, you can write that off on your taxes. You have to use this space exclusively for work purposes and use it regularly. The most common way to calculate how much you can deduct is through the simplified method. This means you can deduct $5 per square foot for up to 300 feet.

2. Office Equipment

Equipment such as printers, stationery supplies, furniture, computers, phones, etc. can all be deducted from your taxes if they serve a business purpose. If you use your personal phone for work purposes, you can deduct part of that service from your taxes.

3. Ongoing Education

If you want to take courses to further your education and knowledge of real estate, you may be eligible for a tax deduction. It must be directly related to real estate and go beyond the required skills and certifications needed for the job. You may be able to write off expenses such as traveling and registration fees.

4. Meals and Travel

Whether you are out with another business professional or eating on a business trip, you can deduct this expense from your taxes. If you are dining out with a client or other professional, you must be conducting work or business items.

You are also able to deduct traveling expenses for business trips such as airfare, accommodations, mileage, or other transportation expenses.

5. Commissions

One item that is often overlooked as a tax deduction is commissions. Whatever amount of commission that is received by other agents can be deducted.

6. Marketing

Marketing materials are an essential part of growing your business but can be a large portion of your budget. Luckily, much of these materials can be written off. This can include brochures, flyers, business cards, website software, etc.

7. Desk Fees

If you as a real estate agent work under a brokerage firm, you can write off items such as desk space, transaction fees, and admin support. However, if you claim this as your primary workspace, you cannot deduct any in-home office expenses.

8. Insurance and Licensing Fees

Fees related to insurance and licensing renewal can be deducted since they are associated with your real estate business.

9. Gifts

If you give any gifts to clients that are under $25, they are eligible for tax deduction. You must have a record showing that the gift was used for that sole purpose.

Find Guidance Through Cooper Norman

Every real estate agent operates differently. These are the most common items you can deduct, but they may differ depending on your specific practice. Our tax professionals can work with you to ensure you are writing off all the right things as a real estate agent. Contact Cooper Norman today to maximize your income.

A checklist of common real estate agent deductions

• Vehicle use. Miles driven to showings, listings, and closings, using either the IRS standard mileage rate or actual expenses. Commuting miles do not count.
• Marketing. Listing photography, signs, online ads, mailers, and your website.
• Dues and fees. MLS fees, board and association dues, and brokerage desk fees.
• Licensing and education. License renewals and required continuing education.
• Home office. A space used regularly and only for your business may qualify.
• Technology. The business share of your phone, internet, CRM, and transaction software.
• Client costs. Closing gifts within IRS limits, and the business portion of qualifying meals.
• Payments to others. Referral fees and assistants paid as contractors or employees.
• Insurance. Errors and omissions coverage and, in many cases, self-employed health insurance.

Self-employment tax and quarterly payments

Because no employer withholds tax from commissions, agents usually owe self-employment tax and should make quarterly estimated payments. Setting aside a share of every commission makes those payments easier. Many agents also review whether an entity election, such as an S corporation, would lower total tax once income is steady. That choice has trade-offs and is worth modeling first.

Keep records that hold up

Use a separate business account and card, keep a mileage log, and save receipts as you go. Deductions without records are the first thing to fall apart if a return is questioned.

Frequently asked questions

Can real estate agents write off their car?

Yes, the business use of a vehicle is deductible. You can use the standard mileage rate or actual expenses, and you need a log of business miles. Commuting does not count.

Are real estate commissions tax deductible?

Commissions you pay to others, such as referral fees or splits paid to another agent, are generally deductible business expenses. Commissions you earn are taxable income.

Can I deduct clothing as a real estate agent?

Usually not. Clothing is only deductible if it is not suitable for everyday wear, such as branded uniforms.

Do real estate agents need to pay quarterly taxes?

Most do, because commissions are not subject to withholding. Quarterly estimated payments help avoid underpayment penalties.

Want a tax plan built around your commissions? Start a conversation with Cooper Norman.