As the old colloquialism goes, death, HOA fees, and taxes are the only things guaranteed in life. Or, something along those lines.
In any case, Uncle Sam is owed his due; and around this time every year, many of us start to sweat a little more—though it has nothing to do with warming temperatures. The truth of the matter is, taxes are complicated, and running your own business can make things even tougher.
What’s deductible? What isn’t? What the heck is accelerated depreciation?
Only a qualified accountant will be able to answer every question you have—but in the meantime, we can cover some relevant tips that real estate agents based in the Virginia and West Virginia region should know prior to April 15th; no vintage green eyeshades required (though they do look quite fetching on you):
Commissions Paid (to Others)
Did you work with another agent at any point this year (hint: yes, you did)? Do you have a team or employees under you who received commission checks over the course of the year? If so, you already know that those amounts can add up quickly. Generally speaking, all of these can be fully deductible as business expenses. We’re off to a good start!
Home Offices
Here’s an obvious one on its face, but can sometimes get a little complicated—as always, consult with an expert before diving in too deep.
Over the past couple of years, the rest of the world finally caught on to the benefits of working from home, and thus, its tax benefits. However, making a few phone calls from your bed isn’t going to pass muster; there must be a dedicated portion of your home that serves as your principal place of business in order to qualify.
Be aware that you can’t double-dip here! If you are already deducting desk fees from your brokerage, then don’t attempt to also claim a home office. As we all learned back in grade school, honesty is the best (IRS) policy.
Ongoing Education and Training
You definitely took advantage of at least ONE of the training courses our The Virginias Region provides, right? RIGHT?! If not, check out our calendar of events and get registered ASAP, because this is a two-for-one benefit!
Not only will you learn how to further increase your professional success, but registration fees, materials, and even some travel costs could possibly be deducted. Just be sure that the courses are maintaining or improving a skill related to your field of real estate—if you have any questions, talk with your team or office lead.
Office Supplies, Business Tools and Meals
All kinds of supplies and equipment necessary to run your business can qualify for deductions. Furniture, printers, telephone bills, fax machines (we might be the only ones in the world who still use these on a regular basis), and other consumables can be expensed in full or as depreciated assets. Additionally, any lead-generation or CRM software subscriptions also count. Finally, you likely already know that meals with clients or other professionals can be written off, but did you know that those at restaurants are 100% deductible for 2021 and 2022 as part of a COVID-19 relief policy?
Check, please!
These are just a few of the things agents should be aware of in order to decrease their tax burden. While a necessary aspect of our lives, taxes really don’t have to be so scary—just be positive that those deductible expenses are directly related to your business, and are ordinary and necessary. If you still have questions, please reach out to any of the Region’s leadership and we will help point you in the right direction. Happy Tax-adays!