May 20, 2024


Mad about real estate

Real Estate: An In-Home Business, With Tax Write Off Perks

One of the best parts about being a real estate agent is that you have the power to be your own boss. You may align yourself with a specific over-arching company, but in the end you call the shots. You determine the hours you work – you can do paper work at 5 at night, 5 in the morning or over lunch. You determine how hard you work and, as a result, how much you make. And quite often, you can determine where you work. This means you can work in your home, and when you set up a business in your home, you have the added perks of tax write offs. But those write offs only benefit you if you know what you’re doing.

First, know how to set up your business so that it is legitimately tax deductible. Your office space should be just that: office space. You cannot use that area for anything other than business. It shouldn’t double as your TV room, your kids’ playroom after school, your kitchen or your bedroom. This needs to be your place of business, not leisure. If the majority of your work is off-site, at a home on the market you are showing for instance, but you do your paperwork and handle all other meetings in-house, you can still write off the space. When you do write it off, be sure to do so properly. If your office is half of your apartment, deduct half of your rent. If your office is one-tenth of your house, deduct ten percent of your mortgage.

Within that space there are also numerous deductibles. Your phone bill, for example, can be written off, provided the calls you make on it are for business. It is easiest, then, to have a separate line for your office instead of using the same land line you do for the house (this will also minimize the number of calls and messages not received because of family miscommunication). All of your office furniture and supplies can also be written off. The desk and chair, the lamp, the pens, the files and the filing cabinet are all potential write offs. Hang on to your receipts when you purchase them to make deducting the cost as easy and accurate as possible.

Stepping outside of the office provides additional opportunities for write offs. Every time you get in your car and drive to a home, condo, commercial real estate lot or any other work-related destination, you are covering miles that can be written off. Keep track of the odometer. The miles to and from your home to a homeowners or a seller’s will add up quickly: Texas is a big state; Austin is a big city. You’ll be surprised how much you can deduct come tax day.

Finally, be honest. It may be tempting to write off everything you can imagine as a business expense, but your mother’s visit for lunch isn’t a business meeting. You may get away with claiming it was  once or even a handful of times, but eventually, the IRS will catch wind, and every deduction you’ve made will come into question. Take advantage of the deductions available to you as a real estate agent running your own business in your home. Do not take advantage of the government.