Eric Sheldon CPA, PC

What tax breaks can a real estate agency take?

You own an agency or a brokerage and you’re looking for some tax breaks. Here are several tax breaks to consider as you plan for your 2022 deductions.

 

Remember, to qualify as deductible, real estate business expenses must be ordinary and necessary, directly related to your business, and a reasonable amount. IRS Publications 463 and 535 can help you determine whether a specific expense is tax deductible.

 

Section 179 Deduction

According to the IRS, for tax years beginning in 2021, the maximum section 179 expense deduction is $1,050,000. Also, the total you can deduct for a passenger automobile, including a truck or van, you use in your business and first placed in service in 2021 is $18,200, if the special depreciation allowance applies, or $10,200, if the special depreciation allowance does not apply.

 

Commissions Paid

Did you know that commissions you pay to other agents or employees that work with or under you are generally fully deductible business expenses? Don’t overlook this deduction since commissions can add up quickly.

 

Professional Services Fees

You will likely pay a lot of professionals, such as the following, for their services while owning a real estate agency or brokerage. Each may be a potential write off, including:

  • Accounting fees
  • Photography fees
  • Staging fees
  • Appraisal fees
  • Legal fees
  • Business insurance fees
  • Private health insurance fees
  • Last year’s tax prep fee
  • Virtual assistant fees
  • Transaction coordinator fees
  • Business banking fees
  • Commissions paid to other professionals

 

10 Common Deductions

Here are some of the most common real estate agent and broker deductions:

  1. Marketing: sales and open house signs and flyers; website development and maintenance; business cards and mailers
  2. Real estate coaching, training, and education costs
  3. Real estate licensing, renewal, and desk fees
  4. Real estate association dues, multiple listing service (MLS) dues and brokerage desk fees
  5. Transportation: automobile maintenance and repairs, gas, mileage, auto insurance, parking and new car purchase or lease costs
  6. Travel airfare, lodging, and meals for real estate education and business purposes
  7. Home office expenses, whether you rent or own your home
  8. Gifts ($25 deduction limit), entertainment, and other costs you incur to please clients and keep them coming back to you for their real estate needs
  9. Meals may be expensed, currently at 100 percent, when you are traveling on business, and when you are dining with clients or with other professionals for the purpose of conducting business or generating referral business.
  10. Software and business tools are fully deductible, including products that help you automatically track your expenses and mileage.

Miscellaneous

Here are some items that don’t quite fit into other tax write-off categories, including:

  • After-tax retirement plan contributions (like traditional IRAs or a solo 401k)
  • Refreshments for clients
  • Rental property losses (for those who own income properties)
  • Closing gifts (only up to $25 per gift, and no more than one gift per recipient in a given year)
  • Referral gifts (only up to $25 per gift, and no more than one gift per recipient in a given year)

 

Claiming tax deductions can get tricky, especially when tax laws change. Avoid making mistakes or missing out on deductions. Give us a call.

 

You Might Also Like

3 Tips Real Estate Brokers Need to Know About Accounting

Starting a real estate agency 5 things you need to know

Real Estate Investing and It’s Tricky Tax Slope

Did you like this article?

Get notified when I publish new articles. Just enter your email address below.

About the Author

Eric Sheldon

Eric Sheldon

Eric Sheldon is a certified public accountant with more than 25 years of experience in a wide variety of industries. He's the owner/operator of Eric Sheldon CPA, PC, an accounting firm that specializes in providing tax strategy and preparation, accounting, and bookkeeping services to individuals and small business owners.

More information:

Maximize Tax Savings by Year-End

As we close out the year and get ready for tax season, here’s what you can do to maximize your tax savings by year-end. Personal Exemptions Personal exemptions are eliminated for tax years 2018 through 2025. Standard Deductions The standard deduction for married couples filing a joint return in 2022 is $25,900. For singles and

Read More »

Tax Tips for Retirees and Retirement Accounts

For many years, IRS rules stated that taxpayers could not keep retirement funds in their retirement accounts indefinitely. They must start taking withdrawals from their IRA, SIMPLE IRA, SEP IRA, or retirement plan account when they reach age 70 1/2. These withdrawals are known as required minimum distributions or RMDs. However, the Setting Every Community

Read More »

Tax Tips for Parents and Individuals

As we close out the year and get ready for tax season, here’s what individuals and families need to know about tax provisions for 2022. INDIVIDUALS – TAX CREDITS Adoption Credit In 2022, a nonrefundable (i.e., only those with tax liability will benefit) credit of up to $14,890 is available for qualified adoption expenses for

Read More »

Maximize Tax Savings by Year-End

As we close out the year and get ready for tax season, here’s what you can do to maximize your tax savings by year-end. Personal Exemptions Personal exemptions are eliminated for tax years 2018 through 2025. Standard Deductions The standard deduction for married couples filing a joint return in 2022 is $25,900. For singles and

Read More »

Tax Tips for Retirees and Retirement Accounts

For many years, IRS rules stated that taxpayers could not keep retirement funds in their retirement accounts indefinitely. They must start taking withdrawals from their IRA, SIMPLE IRA, SEP IRA, or retirement plan account when they reach age 70 1/2. These withdrawals are known as required minimum distributions or RMDs. However, the Setting Every Community

Read More »

Tax Tips for Parents and Individuals

As we close out the year and get ready for tax season, here’s what individuals and families need to know about tax provisions for 2022. INDIVIDUALS – TAX CREDITS Adoption Credit In 2022, a nonrefundable (i.e., only those with tax liability will benefit) credit of up to $14,890 is available for qualified adoption expenses for

Read More »