My Favorite Tax Tools for Real Estate Agents

Check out these popular tax tools for real estate agents!

Real estate agents face a unique set of challenges when it comes to filing taxes. With multiple income streams, commissions, travel expenses, and other deductions to keep track of – having a set process to do your taxes is essential for any agent to ensure they are taking full advantage of the deductions available to them. Here are my favorite tax tools for real estate agents:

Keep Accurate Records

Make sure to keep accurate records of your incoming commission and expenses. You can use our simple sales tracker to track your commission or our more detailed 6-in-1 Ultimate Sales tracker to track commission and expenses. Your broker will be sending you a 1099 at the end of January, which tells the IRS how much in commission you made. Make sure you check this number with your own records, especially if you work at a small or independent brokerage. Brokers are people too and some aren't great with accounting. You don't want your broker to report an inaccurate number, which could cause the IRS to audit you.

A great way to keep track of your expenses is to have a credit or debit card that is solely used for business purchases. If you already set up an LLC for your business, you can open a business bank account to get a debit card or credit card. The Chase Ink Business Unlimited credit card is a good one to start with if you have a new business. Once your business has established credit (by paying off your monthly purchases on time), then you can shop around for better credit cards. By putting all your expenses on a single card, you'll save a ton of time trying to remember if a purchase was for personal or business use.

Use an accounting software like Wave to keep track of all income and expenses in one place. I've been used Wave for years for my accounting. I have an account set up for my business and connect my bank accounts and all my credit cards to it. Then, each month, I can go in and check to see all the income coming in and the expenses going out. Wave also makes it really easy to share your information with your accountant at tax time. I've always used the Free version.

Deduct All Your Business Expenses

Once you have all your expenses in one place, you can categorize them to maximize your deductions. You may be eligible to deduct a variety of business expenses, including marketing and advertising costs, car expenses, office expenses, and home office expenses. You can use our tax planner to help you categorize your expenses and estimate your taxes.

Real estate agents who use their vehicles for work-related activities may be eligible to deduct car mileage on their taxes. Deductions can be claimed for miles driven to view properties, visit clients or attend real estate related events. In order to claim the deduction, you have to keep accurate records of your mileage and expenses associated with using their vehicle.

You can deduct business-related vehicle expenses in either of two ways: through a standard mileage rate approach or by calculating actual costs incurred. To use the standard mileage rate method, you'll need to record details such as odometer readings at the beginning and end of each trip as well as the purpose of the journey in a logbook or spreadsheet. My favorite way to track my mileage is Mileage Ace, since there is no way I would be able to remember to log my miles in a book every time I got in the car to go to a showing. It automatically tracks your trips and connects to my wifi network at home to upload my mileage to an account. Once a month, I log in and sort my trips between personal and business.

Hire an Accountant

Although not a tool per se, a good accountant can be a key advisor for your business. When you are making over $50,000, you may want to consider switching from an LLC to an S-Corp. This YouTube video has a pretty good explanation of how you can save money on taxes by switching. As your income increases it becomes even more important to hire a good accountant to not only help you with filing your tax return, but more importantly, to help you with tax planning. A good accountant will pay for themselves by helping you structure your business so you pay the least amount necessary for taxes.

I typically meet with my accountant in November or early December to discuss my current business finances and make any end-of-year tax saving moves. Some of these can include paying for some business expenses upfront to increase the amount of deductions for the year or contributing to a SEP or Solo 401k retirement account. During this time, he will also give me an estimate on how much I should plan to pay in April. Although, if done right, I already paid estimate taxes throughout the year, so my actual tax payment in April is pretty small.

I don't think filing your taxes is part of anyone's definition of a good time, but hopefully these tips will help you streamline the process. Since it is something you must do each year, the sooner you have a system set up to easily organize your tax information, the less time-consuming it will be in April.

Categories: : Agent Financials, Tech Tools