Track Your Business Expenses
Most business expenses will save you over 40% on your taxes. For example: a $1000 computer will really only cost you $600 out of pocket. The reason you save so much ($400) is because as a self-employed Realtor you pay 4, yes 4, taxes on all money you earn for which you do not have a business deduction. Federal tax, State tax, Social Security tax, and Medicare tax. It only takes net earnings of $40,000 per year, whether you are married or single, to be in this 40% tax bracket.
Car expenses are one of the largest Real Estate Agent deductions!
An Office-In-Home deduction is allowed provided the area is used regularly and exclusively for business use. This replaces the previous law that required a separate entrance and paying tax on the gain when you sold your home. The Office in-Home deduction is allowed whether you rent your home or own it. This means you deduct an average of 8 to 10% of all the costs of your home including depreciation or rent. Some of our clients are even entitled to 50% because they use their whole basement as an office. This is one of the 3 most overlooked tax deductions for all Realtors!
Estimated Tax Payments
Federal due dates are April 15th, June 15th, September 15th and January 15th. Most states are the same. Paying late is expensive. Late filing penalties and interest in the DC metropolitan are 23%, neither of which are deductible. This means that a late $1000 estimated payment could cost you $1230.
Hire Your Spouse (The 2nd Most Overlooked Deduction for Realtors)
As a self-employed individual you are allowed to hire yourself or your spouse and deduct 100% of your medical bills, including health insurance, co-pays, visual, dental etc., as a business expense.
Individual 401k Plan (3rd Most Overlooked Realtor Tax Deduction & Linda’s Favorite!)
As a self-employed individual you may set up a Solo 401k providing you with 3 benefits:
Hot Off the Press!
For 2021 & 2022, 100% of business meals are deductible. The meals must be supplied by a restaurant and you must be present with your client, agent, partner, professional advisor, etc. You don’t need to eat them in the restaurant as long as the meal is ordered/supplied from one. It could be takeout or delivered by Uber eats or GrubHub.
Most commonly this occurs when you’re out showing properties and stop in Panera or Starbucks. You and the client enjoy some food together. This also could occur at a sporting event or before or after the theater or some kind of entertainment/event. The cost of the entertainment itself is not deductible just the actual food. This is a wonderful tax break. Since 1986 business meals have been limited, most recently to only 50%.