What Can I Write Off as a Real Estate Agent?

As a self-employed real estate agent, understanding business write-offs, also known as tax deductions, is key to managing your finances. These are specific expenses the Internal Revenue Service (IRS) allows you to subtract from your gross income. Reducing your taxable income through legitimate deductions can significantly lower the amount of tax you owe.

Operational and Professional Expenses

Real estate agents incur various operational and professional expenses that are considered ordinary and necessary for their business. An expense is ordinary if it is common and accepted in the real estate industry, and necessary if it is helpful and appropriate for your business. These include everyday office supplies like pens, paper, and printer ink.

For agents operating from a dedicated commercial office space, utilities like electricity, heating, and cooling are deductible. Business insurance policies, such as Errors and Omissions (E&O) insurance and general liability insurance, protect against claims of negligence or property damage and are deductible expenses. E&O insurance covers professional mistakes, while general liability covers more common business risks.

Software subscriptions are deductible, encompassing tools like Customer Relationship Management (CRM) systems, transaction management platforms, and design software. Professional fees are another category of deductible expenses, including Multiple Listing Service (MLS) fees, real estate board dues, and state licensing fees. The cost of continuing education courses required to maintain your license and enhance your skills is also deductible.

Bank fees incurred for business accounts, such as monthly service charges or transaction fees, are deductible. Membership dues for professional organizations like the National Association of Realtors (NAR) and local real estate associations are also deductible. A portion of your phone and internet expenses attributable to business use can be written off, based on the percentage of time these services are used for business activities.

Marketing and Client Relationship Costs

Marketing costs are deductible business expenses. Advertising costs, whether for online ads, print ads, signage, or flyers, are fully deductible. Developing and maintaining a professional website, including hosting fees, is also deductible, serving as a digital storefront for your business.

Professional photography and videography expenses for listing properties are deductible. Costs associated with professional staging of homes to enhance their appeal for sale are also considered marketing expenses and can be written off.

Client gifts are deductible, but are subject to a specific limit: no more than $25 per recipient per year. Incidental costs such as packaging, shipping, and engraving are not included in this $25 limit and can be fully deductible in addition to the gift amount.

Client appreciation events, such as open houses or gatherings, are deductible if they have a clear business purpose, such as generating new leads or strengthening client relationships. Business meals with clients are 50% deductible, provided the expense is not lavish or extravagant, and you or an employee is present to discuss business matters. Promotional materials, like branded pens or calendars, can be fully deductible as advertising if they cost less than $4 each and prominently display your business name.

Vehicle and Travel Related Deductions

Real estate agents frequently use their vehicles for business purposes. You have two main methods for calculating vehicle deductions: the standard mileage rate or the actual expenses method. For 2024, the standard mileage rate for business use is 67 cents per mile, increasing to 70 cents per mile for 2025. This method is simpler, as it only requires tracking your business mileage.

Alternatively, you can deduct the actual costs of operating your vehicle for business. These expenses include gasoline, oil, repairs, tires, insurance premiums, vehicle registration fees, and depreciation or lease payments. You must meticulously track all vehicle-related expenses and maintain a detailed log of your mileage, differentiating between business and personal use. This log is necessary for substantiating your deductions, regardless of the method chosen.

Beyond vehicle use, other travel expenses incurred for business purposes are deductible. This includes costs for attending real estate conferences, traveling to show properties, or meeting clients outside your immediate local area. Travel costs include airfare, lodging, and local transportation while away from your tax home overnight.

Meals consumed during business travel are 50% deductible, similar to business meals with clients, provided they are not lavish or extravagant. You must distinguish between deductible business travel and non-deductible commuting costs, as travel from your home to your primary place of business is considered commuting. Travel away from your tax home for business, requiring an overnight stay, qualifies for these deductions.

Home Office Specifics

Many real estate agents operate their businesses from a home office, which can qualify for tax deductions. To deduct home office expenses, you must meet specific IRS criteria. The first is the “exclusive and regular use” test, meaning a specific area of your home must be used solely for business on an ongoing basis. This area does not need to be a separate room but cannot be used for personal purposes.

The second criterion is that the home office must be your “principal place of business” or a place where you regularly meet or deal with clients. Even if you conduct business at other locations, your home office can be considered your principal place of business if it is used for administrative or management activities and you have no other fixed location for those activities. Self-employed real estate agents are eligible for this deduction, unlike employees who cannot claim it.

You have two methods for calculating the home office deduction: the simplified method or the regular method. The simplified method allows you to deduct $5 per square foot of the home office space, up to a maximum of 300 square feet, for a maximum deduction of $1,500. This method is straightforward and requires less record-keeping.

The regular method involves calculating the actual expenses attributable to your home office. This includes a proportionate share of expenses such as rent or mortgage interest, utilities, homeowner’s insurance, repairs directly related to the office space, and depreciation of the portion of your home used for business. The proportion is based on the percentage of your home’s total square footage that the office occupies.

Documentation and Tax Reporting

Meticulous record-keeping is necessary for substantiating all business deductions claimed by a real estate agent. The IRS requires you to maintain accurate records to prove the income and expenses reported on your tax return. This includes keeping all receipts, invoices, bank statements, and detailed mileage logs for vehicle expenses.

You can choose to keep records in either physical or digital formats, as long as they are organized and readily accessible. Digital record-keeping, such as scanning receipts and using accounting software, can simplify the process of tracking expenses throughout the year. The burden of proof for all claimed deductions rests with the taxpayer, meaning you must be able to provide documentation to support each expense.

All deductible business expenses for a self-employed real estate agent are reported on Schedule C (Form 1040), Profit or Loss from Business. This form is used to report your business income and expenses, calculating your net profit or loss. This net figure then flows to your personal income tax return, reducing your overall taxable income.

Tax records, including supporting documentation for deductions, should be kept for at least three years from the date you filed your original return. This period aligns with the IRS’s statute of limitations for auditing a return and assessing additional tax. For certain situations, such as underreporting income by more than 25%, the retention period may extend to six years.