Real Estate Agent Tax Deduction Tips
The year is slowly winding down, and before you realize it, the tax season will be knocking at your door. This means that if you are among the many real estate agents in the market, you should start preparing your tax returns. This is because it is one of the most important things on your mind if your goal is to minimize the amount of tax you want to pay when it’s time to remit your taxes.
Tax deductions and write-offs
If you are looking for ways on increasing your tax deductions and minimize your overall tax burden, then you should consider looking into the following common and often overlooked tax deductibles.
Whichever profession you are in, you always need a car to get from point A to B. This is especially so for real estate professionals who are constantly on the move looking for new clients to showcase their latest available houses. Thus, you should be aware that all that driving is tax deductible which will include gas expenses, cost of maintenance and other car-related expenses. This will also include travelling expenses such as airfare, hotel accommodation and any other travel related arrangements. Thus, keeping receipts well is of utmost importance.
2) Office supplies/Equipment
All real estate professional require a home base to settle along with supplies to ensure work is done such as papers, stationery, pencils or electronics. Virtually all office-related supplies are deductible including magazine subscriptions from which you get relevant information as far as real estate is concerned.
If you are one of the many real estate agents who have set up a home office, then the monthly electricity bill you pay for is also tax deductible. Thus, you should keep a proper track record of all the utility bills you have been paying for so that you can claim them.
4) Commission rebates and GST/HST on vehicle purchase:
If you also offer rebates to your clients, they are 100% deductible. Ideally, all realtors should keep the GST/HST they collect on the full commission received and only provide the consequent rebate which is net of GST/HST.
Since the GST/HST you end up incurring can usually add up to significant tax savings, it is essential that you get the purchases you spend on your vehicle right as the GST/HST rules aren’t straightforward on matters where a purchase does not wholly benefit your real estate business.
5) Client-Related Expenses
If you have taken a potential or new buyer or seller out for lunch or dinner in an effort to create a better rapport with them prior to having them sign on a property contract, you can claim 50% of those dining and entertainment expenses.
Understanding how tax works in real estate is one of the most important things that a realtor has to learn if they really want to excel in this field and minimize their amount of tax remittance. By identifying which type of expenses qualify along with contacting the relevant people and practicing good accounting principles as highlighted, you can be assured that your real estate business or career will flourish and no problems will arise with the taxing authorities.