Tax Tips Real Estate, Internal Revenue Service

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Tax Tips - Real Estate

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Employee or self-employed?

Do you qualify to exclude your gain?

This frequently asked question and answer page provides information on allowable deductions for mortgage interest on second mortgages, home equity lines of credit, property taxes, points and more.

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Watch this video to learn about reporting interest paid on a qualified residence, home equity indebtedness, debt treatment & limitations, mortgage points & closing costs and reporting interest on rental property.

This deduction provides businesses with an incentive to clean up certain sites that are contaminated with hazardous substances. Refer to the section on Environmental Cleanup Costs in Publication 535, Business Expenses.

When are you required to report rental income and expenses?

Your losses may not be currently deductible.

Taking credit for history.

Time is on your side.

Destroyed, stolen, or condemned property?

Defer your gain under Internal Revenue Code Section 1031.

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List of Tax Deductions for Real Estate Agents and Brokers

Real estate agent fees tax deductible

HEALTH INSURANCE FOR SELF-EMPLOYED TAX REMINDER

As members gather their tax information for their filings, questions arise about the deduction for health insurance premiums. The allowable deduction of health insurance premiums paid by self-employed individuals is 100% of the premium. Note that the deduction does not apply to premiums that are paid either to an employer's health plan or to the health plan of the self-employed person's spouse. For more info, CONTACT: Linda Goold, 202/383-1083, lgoold@realtors.org (12-11-02)

Accounting Fees

Connected with Trade or Business

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Organization of Business (Must Amortize)

Accounting System Installation

Advertising Expenses

Attorney Fees Related to Business

Automobile Expenses (Business Percentage Only)

Business Use by Employee

Business use by Self-Employed Person

Cost of car (Must Depreciate)

Interest Expense (except as an employee)

Lease Cost (Limited)

Oil and Lubrication

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Business Conventions (Domestic)

Travel and Lodging Expenses

Business Meals and Entertainment

Business Startup Expenses (Must Amortize)

Circulation Expenditures, Newspapers, Magazine Periodicals

Commissions

Sale of Real Estate

Computer Software

Purchased Software (Generally Must Amortize)

Chamber of Commerce

Professional and Realtor Associations

Education Expenses

Maintaining or Improving Required Skills

Employee Expenses and Payroll

Gifts (Business) Valued at $25 or Less

Health Insurance (Limited)

Insurance for Business

Internet/Website Fees (Business)

New Business, Cost of Start Up (Must Amortize)

Occupancy (Business) Expense

Real Estate Taxes

Cleaning and Maintenance

Office Equipment and Furniture (Must Depreciate or Make Special Election – Section 179)

Office in Home (Limited)

Real Estate Taxes

Cleaning and Maintenance

Real Estate License Fee

Rent, Business Property

Retirement Plans (Limited)

Subscriptions, Professional Journals

Telephone Service (Business)

Updated 01/03/06 for the North Shore - Barrington Association of REALTORS® by Graff, Ballauer, Blanski & Friedman, PC, CPAs. All Rights Reserved.

North Shore - Barrington Association of REALTORS ®

450 Skokie Blvd, Bld 1200 Northbrook, IL 60062 | Map

1250 S. Grove Ave, Ste 200 Barrington, IL 60010 | Map

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What Tax Deductions Can Real Estate Agents Take, Home Guides, SF Gate

What Tax Deductions Can Real Estate Agents Take?

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Ordinary and necessary business expenses are tax-deductible for real estate agents.

Related Articles

Real estate agents can deduct any business expense that is both ordinary and necessary to make a profit, according to the IRS. Typically, real estate agents may deduct advertising costs, professional and licensing fees, educational costs, a portion of the expenses associated with the business use of their homes and any automobile expenses associated with business use.

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Advertising

Business cards, open house flyers, "for sale" signs, newspaper ads and other forms of advertising can usually be deducted as business expenses. Advertising encourages people to contact you for business, which can result in a profit. Since most real estate agents must advertise to generate real estate leads that result in sales, advertising costs are both ordinary and necessary, which qualifies for a tax deduction.

Professional and Licensing Fees

Fees charged by attorneys consulted strictly in regard to a real estate business are tax-deductible, according to the IRS. Costs for accountants or tax preparers may be tax-deductible on itemized tax returns only. Some real estate agents choose to join the National Association of Realtors or any of its affiliated chapters to elevate their public status by adhering to a strict code of ethics. Costs of membership may be tax-deductible. Additionally, the cost of obtaining and renewing a real estate license may be tax-deductible.

Educational Costs

Coursework to obtain or renew a license may be tax-deductible. The IRS requires proof that any seminars, workshops or classes improve skills or are required by law to keep your license in order for those expenses to be tax-deductible.

Home Office

Mortgage interest, homeowner’s insurance, utilities, repairs and depreciation for the portion of the home converted into a home office qualify for a business expense tax deduction. All expenses must reflect the percentage of the home used as an office, whether the office is a separate room or a section of a room screened off from the rest of the house. A second phone line dedicated to the business may also be deductible.

Automobile Expenses

Most real estate agents use the same vehicle for business and personal use. Automobile expenses must be divided based on actual mileage used for business purposes. For example, say a real estate agent’s total yearly mileage is 45,000 miles, but only 25,000 miles were used to preview and show properties, hold open houses and attend office meetings. The percentage of business use would be 55 percent. If total automobile expenses for the year equaled $15,000, only $8,250 would be tax-deductible. Some real estate agents prefer to take the standard mileage deduction, which is 50 cents per mile for 2010. That means $12,500 may be tax-deductible for automobile expenses.

References (3)

About the Author

Angela Lam Turpin has been a writer for 20 years. Her articles and essays have appeared in "San Jose Mercury News," "The Sun," and in the book, "Wild Child: Girlhoods in the Counterculture" (Seal Press). She is a licensed Realtor (CA Dept of Real Estate License #01201734) experienced with residential sales, mortgage loans, and foreclosures.

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