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Maximize Your Deductions and Credits

Tax laws in the United States, at both a federal and state level are complex. For real estate professionals, staying in compliance with these laws and regulations requires expert advice.

Don’t trust your taxes with just anyone – get matched with a CPA who specializes in real estate tax deductions and filing. RLTY Tax offers exclusive access to a nationwide network of CPAs to help ease the stress of tax season.

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Tax Deductions

Are you commuting between real estate properties, the office, and other lead generation efforts?

General tax deductions:

  • Licenses and MLS fees/Dues
  • Marketing coast
  • E&O Insurance
  • Commission paid to other agents
  • Education and training

Some examples of tax deduction every agent or broker should know about and take advantage of:

Deductions are available for:

  • Gas
  • Vehicle lease costs
  • Vehicle depreciation
  • Train and subway fees
  • Car insurance and registration and traning

Deductions for your time in the office? 

Examples include:

  • Office rent
  • Office supplies
  • Internet
  • Cellphones and other electronic devices used for business
  • Virtual assistant

Tax Liability

While tax deductions can save a lot of money, real estate agents and brokers have to be careful. Tax fraud and misfiling can result in future monetary and criminal problems. RLTY can help you determine the most prudent tax deductions and credits to claim.

 

Using an accountant may sound expensive but the benefits far outweigh the cost, especially with the discounted rates we have negotiated for you.

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Tax Flexibility

Using a limited liability company provides you with the most tax flexibility.

An LLC is taxed on a pass-through basis, with the business profits or losses passed through to the owner’s personal tax return. Earnings are taxed at your applicable individual income tax rates and subject to Self-Employment taxes (which includes Social Security and Medicare taxes).

But, if the LLC meets certain IRS eligibility criteria, you can file an S corporation election with the IRS. With S corporation tax treatment, you are not subject to the Self-Employment tax. Sound complicated? Let us help. Legally avoiding self-employment taxes could save you up to $10,000 on the first $100,000 you earn in a year!

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FAQ

Frequently Asked Questions

What is the difference between employees and the self-employed?

The vast majority of real estate agents are legally considered self-employed. They are not employees. This distinction comes with a few key differences in how income taxes are paid. You may see the expression “independent contractor” in your paperwork with your brokerage, this is just another way to say “self-employed”.
Real estate agents working as brokers with a firm, rather than as employees, are typically taxed as sole proprietors, LLCs, or S Corps, depending on their business structure. As self-employed individuals, agents owe self-employment tax, must pay estimated quarterly taxes, and can claim business-related tax deductions.
As a real estate agent, you’re typically considered self-employed, even when working under a brokerage firm. This means you’re responsible for managing your own taxes as a business owner. It’s important to track your business income and expenses throughout the year to make tax filing a smooth process. Periodically consulting with an accountant can help you stay informed about tax policy changes that may impact your tax liability.
A tax deduction reduces your taxable income and tax liability. When deducting the amount from your income, the portion that’s taxable decreases.

RLTYco’s tax experts can help you navigate deductions and save you thousands of dollars come tax time, ensuring you keep more of the hard-earned money you make. We always recommend tracking your expenses and working with a professional to maximize your tax benefits.

Common deductions include home office expenses, business travel and meals, internet and phone bills, educational expenses, health insurance premiums and fees on commission funding. Real estate agents can also deduct self employment taxes, contributions to retirement plans and health savings accounts. Common tax credits include the Earned Income Tax Credit and the Child and Dependent Care Credit.

You can also deduct expenses related to your car, such as gas and wear and tear. You can claim deductions for miles traveled for work, including local travel for showings and longer trips.

The percentage depends on your taxable income, which is your earning minus eligible deductions. As a self-employed agent, you’ll need to account for both the self-employed tax rate and your federal income tax rate, which varies depending on your income. You will also need to set aside money for state income taxes. Consulting a tax professional can help you create a personalized tax plan.
Your business tax classification, or entity type, dictates how your business is taxed and which tax forms you need to file. The most common business tax classifications are sole proprietorship, partnership, LLC, S-Corporation, and C-Corporation. Your classification is based on factors such as the number of owners, the level of liability protection you seek, and how you prefer your business income to be taxed.
For most real estate professionals, the deadline for filing income tax returns is either March 15th or April 15th. However, these deadlines can vary depending on your state and any extensions you may have requested.
For most businesses, the deadline to file for an extension is March 15th or April 15th, depending on the tax year. Filing an extension grants you an additional six months, making the final deadline either September 15th or October 15th.
The forms you need depend on your business entity and tax situation. Common forms for business taxes include 1099s and a Schedule C for sole proprietorships. Your business may be required to file other forms based on its specific operations and obligations.
Failing to file your tax return or pay taxes by the deadline can result in penalties and interest charges. These penalties can accumulate quickly and result in substantial amounts owed to the IRS or state tax agency. In severe cases, failure to file or pay taxes may lead to legal action.
If you or your business is selected for an IRS audit, you’ll be notified by mail with details on the specific items they want to review. During the audit, the IRS will review your financial records, receipts, and other documentation to verify the accuracy of your tax return and confirm you’ve paid the correct amount of tax. To prepare, ensure that all your financial documents are organized and easily accessible and consider consulting a tax professional for further guidance.
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