Tax Tips for Real Estate Agents
Strategic Tax Group
Steve Eubanks, EA
www.strategictaxgroup.com
972-788-1524
steve.eubanks@strategictaxgroup.com
4518 Nashwood Lane • Dallas, Texas 75244
Steve Eubanks, EA (Enrolled Agent)
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A tax professional since 1986.
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BBA and MBA in Finance.
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Licensed by the U.S. Department of the Treasury to represent
taxpayers before all administrative levels of the Internal Revenue
Service (IRS), including examination, collection and appeals
functions as Enrolled Agent.
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Enrolled Agents adhere to a code of ethics and professional
conduct and are required by IRS to take Continuing Professional
Education.
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Provide tax preparation, representation, tax planning and other
financial services to individual and business taxpayers.
Introduction
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Licensed Real Estate Agents
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IRS ruling Statutory NonEmployee Independent
Contractor. Treated as Self-employed.
Substantially all payments for their services relates
directly to sales or output rather than hours worked.
Their services are performed under a written
contract providing that they will not be treated as
employees for Federal Tax purposes.
Form 1040, Schedule C (Profit & Loss)
reporting for Real Estate Agents as Sole
Proprietorships
Schedule C
RE Agents National Average Expenses
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National Average of Expenses as a
Percentage of Income
Advertising – 4.89%
 Car Expenses – 8.81%
 Commissions – 6.49%
 Depreciation – 2.45%
 Other Expenses – 10.49%
 Business Use of Home – 1.09%
 Total Expenses – 54.43%
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Common Expenses
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Advertising Costs: Signs, newspaper advertising, flyers, online
advertising, post cards, promotional materials, and anything else that
was used to market your business may be deductible.
Professional Fees: Your MLS Board Dues, Realtor Dues, Renewal fees
with your state board, Errors & Ommissions Insurance, and any other
professional fees you incur may also be deductible.
Education Materials: Any continuing education classes or seminars,
books, magazines, etc.
Client Gifts: New home or closing gifts for your clients. For tax
purposes, you are allowed a deductions for gifts valued at up to $25 per
person ($50 per couple). Items advertising your business would not be
considered gifts.
Office Equipment: Office equipment can include desk fees if you have
them at your office, computer/software, phone fees (including cell
phone), cameras, office supplies, and anything else related to
necessities of running your office.
And More……
Meals and Entertainment
Meals, sports tickets, and other
entertaiment.
 Must have documentation for the
expense, including statement of the
business purpose, names of the persons
being entertained, date and location.
 Generally only 50 percent of business
meal and entertainment expenses can
be deducted.
 Must discuss business either before,
during or after entertainment.
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Car/Driving Expenses
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Car/Driving Expenses: This is an obvious one most agents remember but many often get confused about how much mileage they can deduct
or how to separate “personal” and “business use”.
 Actual Expenses – You may deduct the actual expenses of
operating your car for business. This includes gas, insurance,
repairs, maintenance, license, and depreciation.
 Standard Mileage Rate – You simply multiply your business miles
driven during the year by the IRS standard rate for the year.
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Other Expenses – Some other auto expenses you are allowed for
either method are parking fees, tolls, interest expense.
AAA Average Cost 2008
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2009 the rate is 55 cents per mile.
2010 the rate is 50 cents per mile.
Medium Sedan driven 15,000 miles - 54 cents per mile
Large Sedan driven 15,000 miles – 65.8 cents per mile
Track Mileage
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Total miles (business and personal)
Business miles
Business Use of Home (Form 8829)
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To deduct expenses for business use of the home, part of your home must be
used regularly and exclusively as one of the following:
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The principal place of business for your trade or business;
The place where you meet and deal with your patients, clients, or customers in the
normal course of your trade or business; or
In connection with your trade or business, if you use a separate structure that is not
attached to your home.
Where the exclusive use requirement applies, you cannot deduct business
expenses for any part of your home that you use for both personal and business
purposes. For example, if you are an real estate agent and use the den of your
home to make appointments and also for personal purposes, you may not deduct
any business–use–of–your–home expenses. Further, under the principal-place-ofbusiness test, you must determine that your home is the principal place of your
trade or business after considering where your most important activities are
performed and most of your time is spent, in order to deduct expenses for the
business use of your home.
Deductible expenses for business use of your home include the business portion
of real estate taxes, deductible mortgage interest, rent, casualty losses, utilities,
insurance, depreciation, maintenance and repairs. You may not deduct expenses
for lawn care in general or for painting a room not used for business.
Record Keeping
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Record Keeping System
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Filing system for receipts and documents
Paper
 Electronic
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Bookkeeping system
Quickbooks (Simple, Pro, Premier)
 Spreadsheet (www.strategictaxgroup.com)
 Notebook (paper)
 Record weekly, bimonthly, monthly, quarterly
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Retirement Accounts
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SIMPLE IRA
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SEP
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20% of SE income or $49,000
Simple to establish and administer
Keogh
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$11,500 contribution limit
20% of SE income or generally $49,000
Can be designated a profit-sharing plan or a defined benefit
plan. Generally requires a professional to set up.
Solo 401(k)
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$49,0000
High contribution limits mean you can lower your tax bills and
generate more tax-deferred earnings for your retirement.
Estimated Tax Payments
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Due Dates
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Underpayment Penalty
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April 15
June 15
September 15
January 15
If you do not pay the proper amount of quarterly payments,
Or make the payments late
Your should equal the smaller of:
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90% of the tax to be shown on your current year tax
return, or
100% of the tax shown on your prior year tax return.
Each estimated payment should be 25% of the total
amount.
Questions?