As a real estate agent, it’s important to stay on top of your finances and understand the tax implications of your business. Tracking certain expenses and income can help you maximize your deductions and minimize your tax liability. Here are seven things that every real estate agent should track this year:
1. Business Expenses
One of the most important things to track as a real estate agent are your business expenses. This includes any costs related to marketing, advertising, office supplies, and professional development. Keep detailed records of these expenses throughout the year, as they can be deducted from your taxable income.
Remember to keep receipts and invoices for all business-related expenses. This will make it easier to provide documentation if you are ever audited by the IRS.
2. Home Office Expenses
If you have a dedicated home office space, you may be eligible to deduct certain expenses related to it. This can include a portion of your rent or mortgage, utilities, and even internet and phone bills. Keep track of these expenses and consult with a tax professional to determine what you can deduct.
Be aware that the IRS has specific criteria for what qualifies as a home office, so make sure you meet the requirements before claiming this deduction.
3. Mileage
Real estate agents often spend a significant amount of time driving to and from properties, meetings, and showings. Keep track of your mileage throughout the year, as it can be deducted as a business expense. You have two options for deducting mileage: the standard mileage rate or actual expenses.
The standard mileage rate is set by the IRS and is updated annually. It is a fixed amount per mile driven for business purposes. Alternatively, you can track actual expenses such as gas, maintenance, and insurance, and deduct the percentage that is used for business purposes.
4. Commission and Fees
Real estate agents typically earn income through commissions on sales. It’s important to track and report all commission income, as well as any fees you pay to your brokerage or real estate association. These expenses can be deducted from your taxable income.
Keep copies of all commission statements and receipts for fees paid. This will help you accurately report your income and deductions when it’s time to file your taxes.
5. Continuing Education and Licensing
Real estate agents are required to complete continuing education courses and renew their licenses periodically. These expenses can be deducted from your taxable income. Keep track of any fees paid for courses, exams, and license renewals.
Additionally, if you attend any conferences or seminars related to real estate, you may be able to deduct the registration fees and travel expenses associated with attending these events.
6. Health Insurance Premiums
If you are self-employed and pay for your own health insurance, you may be eligible to deduct your premiums. Keep track of the amount you pay for health insurance each month, as well as any out-of-pocket medical expenses.
It’s important to note that there are specific criteria for deducting health insurance premiums, so consult with a tax professional to ensure you meet the requirements.
7. Retirement Contributions
As a real estate agent, you may not have access to a traditional employer-sponsored retirement plan. However, you can still save for retirement and receive tax benefits by contributing to a self-employed retirement plan, such as a Simplified Employee Pension (SEP) IRA or a solo 401(k).
Keep track of your contributions to these retirement plans, as they can be deducted from your taxable income. Consult with a financial advisor to determine the best retirement plan for your situation.
By tracking these seven things throughout the year, you can ensure that you are maximizing your deductions and minimizing your tax liability as a real estate agent. Remember to keep detailed records and consult with a tax professional to ensure you are in compliance with all tax laws and regulations.
