Taxes for Real Estate Agents
Strategic Tax Group
Steve Eubanks, EA
www.strategictaxgroup.com
972-788-1524
steve.eubanks@strategictaxgroup.com / staxg@sbcglobal.net
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 reporting for Real
Estate Agents as Sole Proprietorships
Schedule C
Schedule C: Income
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Income
Report on Schedule C, Line 1
 1099-MISC, Box 7, Nonemployee
Compensation ($600 or more)
 Commissions
 Referral Fees
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Schedule C: Income
Schedule C: Expenses
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Expenses
Ordinary and Necessary
 Auto (actual expenses or standard mileage
rate)
 Meals and Entertainment (50% limitation)
 Depreciable Assets (Form 4562)
 Home Office (net income limitation) (Form
8829)
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Schedule C: 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.
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”. Another confusing thing for many agents is
deducting depreciation if you own your car or lease payments if you lease. You
can choose to deduct per mile driven or you can also do the actual cost of
insurance, gas prices, repairs & maintenance, and other vehicle expenses.
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.
Business Entertainment: You can deduct fees for dinners, event tickets that are
business oriented, entertaining for business at home, and anything else related to
costs you incurred for entertaining business clients. Be careful with this one - be
sure it was really for business before claiming it.
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.
Schedule SE
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Self-employment tax (SE tax) is a social security and Medicare tax primarily for
individuals who work for themselves. It is similar to the social security and
Medicare taxes withheld from the pay of most wage earners.
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You figure SE tax yourself using Schedule SE (Form 1040). Social security and
Medicare taxes of most wage earners are figured by their employers. Also you
can deduct half of your SE tax in figuring your adjusted gross income. Wage
earners cannot deduct social security and Medicare taxes.
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SE tax rate. The self-employment tax rate is 15.3%. The rate consists of two
parts: 12.4% for social security (old-age, survivors, and disability insurance) and
2.9% for Medicare (hospital insurance).
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Maximum earnings subject to SE tax. Only the first $102,000 of your combined
wages, tips, and net earnings in 2008 is subject to any combination of the 12.4%
social security part of SE tax, social security tax, or railroad retirement (tier 1) tax.
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All your combined wages, tips, and net earnings in 2008 are subject to any
combination of the 2.9% Medicare part of SE tax, social security tax, or railroad
retirement (tier 1) tax.
Adjustments to Income
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Retirement Contributions
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Health Insurance
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A traditional IRA lets you contribute only $5,000 annually in
pretax income toward retirement
while a Keogh or SEP-IRA lets you contribute the lesser of 25
percent of earned income or $46,000.
A SIMPLE IRA lets you reduce your pretax income by $10,500
a year, plus your company can contribute a match of up to 3
percent of your compensation.
100% of cost
Not eligible for any group insurance
Net income limitation
Adjustment for one-half self-employment tax
calculated.
Estimated Tax Payments
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You must pay estimated tax (Form 1040-ES)
for 2009 if both of the following apply.
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You expect to owe at least $1,000 in tax for 2009
after subtracting your withholding and credits.
You expect your withholding and credits to be less
than the smaller of;
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90% of the tax to be shown on your 2009 tax return, or
100% of the tax shown on your 2008 tax return.
Due dates for Form 1040-ES
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April 15
June 15
September 15
January 15
Business Common Tax Forms
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Form 1040 – Individual Income Tax Return
Schedule C – Profit or Loss from Business
Form 4562 – Depreciation and Amortization
Schedule 8829 – Business Use of Home
Schedule 2210 – Underpayment of Estimated Tax
Form 4868 – Automatic Extension for Time to File
Form 1040-ES – Estimated Quarterly Tax Payments
Publication 334 – Tax Guide for Small Businesses
Questions?