What Can You Write Off as a Real Estate Agent?

Real estate agents, often operating as independent contractors, navigate a unique financial landscape. Understanding tax deductions is a powerful tool to optimize tax liabilities, allowing agents to retain more income and directly impacting their profitability. Recognizing eligible write-offs helps agents make informed decisions about their expenditures.

General Rules for Business Deductions

For an expense to be deductible, it must satisfy specific criteria. An expense is “ordinary” if it is common and accepted in the real estate industry. A “necessary” expense is helpful and appropriate for the business, though it does not need to be indispensable.

Expenses must also be directly related to earning income as a real estate agent, clearly separating business from personal expenditures. Costs incurred for personal benefit are not deductible. Deductible expenses should be “reasonable in amount,” meaning they are not extravagant or lavish. Most individual real estate agents operate on a cash basis, deducting expenses in the tax year they are paid.

Common Business Write-Offs

Many expenses incurred by real estate agents are deductible, including:

• Advertising and marketing efforts: Costs for website development and hosting, online advertisements, social media promotions, physical signage, flyers, brochures, and professional photography for listings.
• Professional development and education: Costs for continuing education courses, attendance at real estate conferences and seminars, and subscriptions to industry-specific publications. Licensing fees are also deductible.
• Office expenses: For a commercial space or a qualifying home office, including rent, utilities, office supplies, and cleaning services. Internet and phone services are deductible.
• Professional fees: Multiple Listing Service (MLS) fees and dues for real estate associations like the National Association of Realtors (NAR) or local boards are fully deductible. Legal and accounting fees paid for business purposes also qualify.
• Technology and software expenses: Computer hardware, real estate-specific software (e.g., customer relationship management (CRM) systems, e-signature platforms, listing management tools), and general business software subscriptions.
• Client gifts: Deductible up to $25 per recipient per year.
• Business meals: Where the agent is present and a clear business purpose is discussed, are 50% deductible. This includes meals with clients, prospects, employees, or vendors.
• Insurance premiums: For policies directly related to business operations, including professional liability insurance (Errors & Omissions or E&O) and business property insurance.
• Bank fees: Associated with business checking accounts, such as monthly maintenance fees, transaction fees, wire transfer fees, and credit card processing fees.
• Travel expenses: Incurred for business purposes, such as attending out-of-town conferences, including costs for flights and lodging. Vehicle expenses are handled separately due to their specific rules.

Specialized Deduction Areas

Some deductions have specific requirements for real estate agents.

Home Office Deduction

The home office deduction requires a portion of the home to be used exclusively and regularly for business. This means the space cannot double as a guest room or family area. Agents can calculate this deduction using two methods: the simplified option or the regular method.

The simplified method allows a deduction of $5 per square foot for up to 300 square feet, resulting in a maximum deduction of $1,500 for tax year 2024. For tax year 2025, this rate increases to $6 per square foot, capped at $1,800. The regular method allows agents to deduct a percentage of actual home expenses, including a portion of mortgage interest, property taxes, utilities, insurance, and depreciation, based on the business-use percentage of the home. This method often requires more detailed record-keeping.

Vehicle Expenses

Vehicle expenses are a common deduction for real estate agents. Two main methods exist for claiming these costs. The standard mileage rate for business use in 2025 is 70 cents per mile, covering costs like fuel, oil, maintenance, insurance, and depreciation. Tolls and parking fees can be deducted in addition to the standard mileage rate. The alternative is to deduct actual expenses, which includes costs for gas, oil, repairs, insurance, lease payments, and depreciation. Choosing this method necessitates meticulous record-keeping to differentiate business from personal mileage.

Depreciation of Business Assets

Depreciation allows agents to recover the cost of large purchases over several years. Instead of deducting the full cost in one year, assets like computers, office furniture, or specialized real estate equipment are depreciated. Section 179 of the tax code permits businesses to deduct the full purchase price of qualifying equipment and software in the year it is placed in service. For 2025, the maximum Section 179 deduction is $1,250,000, with a phase-out threshold beginning at $3,130,000 in equipment purchases. Bonus depreciation also allows for an accelerated deduction of a percentage of the cost of qualifying assets, which for 2025 is 40%.

Documentation for Deductions

Accurate record-keeping is crucial for substantiating business deductions and for tax authority audits. Organized records provide verifiable proof of the legitimacy and business purpose of each claimed expense.

Agents should keep documents such as receipts, invoices, bank statements, and credit card statements. For vehicle expenses, mileage logs are important, documenting the date, mileage, destination, and business purpose of each trip. Appointment books and calendars can also serve as supporting documentation.

Records can be maintained digitally through scanned receipts, accounting software, or mobile applications, or physically in organized folders. For each expense, capture key information, including the amount, date, payee, and a clear description of the business purpose. This helps justify the deduction.

Tax records should be kept for at least three years from the date the original return was filed or two years from the date the tax was paid, whichever is later. If a significant amount of income was underreported (more than 25% of gross income), the retention period extends to six years. For records related to property, they should be kept until the statute of limitations expires for the year in which the property is disposed of.