Tax Deductions for Real Estate Agents

July 20, 2021
8:00 am

As a real estate agent earning commissions, you run your own business. That means you can deduct many business expenses from your taxes. Check out this guide to tax deductions for real estate agents.

Your business situation

Your working situation determines your ability to deduct expenses. If you are self-employed — that is, you set your schedule, pay for the equipment and supplies you use, and receive IRS tax form 1099 each year documenting your income — you can likely write off several business expenses. On the other hand, if you are a brokerage employee who receives W-2 income, you can deduct fewer expenses and only ones that your employer hasn’t reimbursed.

Keep track of these potential write-offs

Before claiming the following deductions, check with your professional tax adviser to see if you qualify.

  • If you work primarily from home, you can claim the percentage of your house you use as a workspace as a deduction. You can also claim the comparable percentage of utilities and other home expenses that make use of that space possible. If you work from a desk at the brokerage firm and pay a desk fee, that is deductible. Since Fathom has no brick-and-mortar offices, our agents avoid desk fees, leaving them more money to put back into their business and brand! Agents who work both at home and in an office must choose which of these deductions to claim.
  • Expenses for marketing and advertising, including printed materials, media rates paid, staging costs, online ads, and signage, are deductible.
  • Use of your car is deductible. Whether it is better to claim the standard mileage deduction or your direct costs depends on how many miles you drive per year for business. If it’s more than 10,000 miles, you’ll probably benefit more from the standard deduction; if less, it’s probably best to claim the direct cost of using your vehicle. In either case, it’s essential to keep track of your mileage for documentation.
  • The cost of fees, professional association membership dues, MLS access rights, E&O liability insurance, and similar expenses are deductible. Incidentally, Fathom pays for its agents’ E&O liability coverage.
  • The cost of office supplies, computers used for business, printers, and other similar tools are deductible.
  • Meals with clients and with business colleagues are deductible, as are client gifts up to certain limits.
  • Continuing education and training costs for the maintaining and betterment of your real estate career are deductible. In addition, Fathom offers its agents a full monthly training calendar, at no cost.
  • Commissions paid to other agents are deductible.