Top 11 Tax Deductions for Real Estate Professionals and Entrepreneurs

By Chris O’Neal, CPA, MBA

As we round out the year and approach yearend tax season, I thought it would be a good time to go over some of the top deductions that most self-starters overlook.?These deductions can add up to big savings for you and your business.?As real estate professionals and entrepreneurs, almost everything you purchase in the course of running your business is going to have the chance of being deductible on your tax return, as long as it’s ordinary and necessary, and it’s reasonably priced.

Now, if you’re a Nealson Group client, you already know exactly how much you are going to be writing off since we keep track of all of your expenses for you, and send you quarterly financials.?

1.??Office Expense

The office you rent and the utilities you pay for your space are deductible expenses, as are the paper, pens, pencils, paperclips, etc. As I mentioned before, if it’s reasonable and necessary, reasonably priced, and you need it to do your job, odds are it’s deductible.?If you work from home, you can write off a portion of your home.?Again that would include utilities, mortgage, homeowners’ insurance, homeowners’ association dues, upkeep, etc.?Contact your real estate CPA firm for more detail on how to use your home office as a deduction.?There are some particular rules you must follow.?

Oh, and I know what you’re thinking because if I’ve heard this once I’ve heard it a thousand times; “But if I have a home office, I’ll be asking to be audited.”?For the one thousand and one times, no, no, no you won’t.?Not sure who started that rumor but they should be punched in the nose.?And anyway if you’re following the IRS’ rules and you have a top notch real estate CPA on your side, what are you worried about??However, if you’re still working with a bookkeeper, who’s not a licensed CPA, then, good luck.

2.?Car Expense

The cost of your hot rod is a big deduction.?Not just the gas, but all the maintenance.?The key point is record keeping; a must for all deductions, but one that is so pushed to the side and forgotten until the end of the year.?Trying to create a mileage log from memory, is not only not recommended, it’s not going to work.?However, if record keeping is just not your thing, you do have a couple of options.?One is use the standard mileage rate published by the IRS, in 2022 it’s $0.585 per business mile (but check their website or contact your real estate CPA because these figures change almost yearly).?You won’t have to worry about how much you spent on gas, oil changes, etc., but you still have to keep track of your business mileage. A second option is to use a mileage tracking and logging app on your smart phone, like MileQ, to help you with the mileage tracking.

3.?Meals and Entertainment

See my prior post, IRS Meals and Entertainment, this is one of the most used and abused deductions out there.?Read my post; consult with your real estate CPA.?Remember it’s only 50% if it even qualifies.

If you do not play this one smart, this one will (along with the IRS) come back to bite you in the rear-end and they won’t leave a tip.

4.?Supplies

These are items you use up within one year: paper, postage stamps, pencils, post-it notes.?Items that you purchase that you don’t plan to use within a year could be considered inventory.?But that’s a topic for another discussion.

5.?Travel

Not family travel, business travel.?You can deduct your expenses when you go out of town for your real estate business.?The deductible expenses are for transportation costs (taxi, commuter bus, airplane) and lodging.?See above for the meals and entertainment costs you rack up while on your business trip.?You can also fall asleep reading the following IRS publication, Pub 463, or you can contact your real estate CPA.?Just saying.

Note, there has to be a bona fide business purpose for the travel.?You are a Real Estate Professional.?You have to think and act like one.?Don’t think you’re smarter than Uncle Sam.?He’s wicked smart.?But so is your Nealson Group CPA.?

6.?Business licenses and Insurance

Absolutely!?If you’re paying the state to allow you to work, keep the receipt. It’s a tax deduction.

7.?Advertising

As long as they are directly related to your business, advertising and marketing expenses are deductible.

8.?Dues and Associations

Professional organizations, service and business groups, and other outside professional groups that you are paying to further your business could be deductible if they are directly related to your business.

9.?Continuing Education and Training

This area isn’t so cut and dry (ha, most of these have a sprinkle of “it depends”), so consult your real estate CPA.?But if you take training courses to further your professional career, you might be able to deduct the course materials and tuition.?If you’re a real estate professional or a CPA, you have to take continuing education courses to maintain your licenses.?These little gems of education are tax deductible.

10. ??Paid Commissions

Not to you silly, that’s income.?However, the money your business pays to other consultants, agents, or employees that work for you could be fully deductible.

11.?Professional Services

That’s right; the services offered by the Nealson Group are 100% tax deductible for your business.?

“But Chris, the Nealson Group offers professional accounting and tax preparation services.?Are you saying that the entire monthly amount is deductible? That can’t be.”?Yes lucky reader, that’s exactly what I’m saying.?Tax preparation fees and accounting services are fully deductible.?

Just think, you can let the Nealson Group maximize your real estate business and personal deductions while ensuring you are in compliance with both state and federal laws….. AND……you can write the entire amount off!?BAM, thank you Uncle SAM.

Tax law is a very tricky area; do not play games with the IRS.?Everything I mentioned above has to be put against your specific facts and circumstances.?I’ve said before that in the world of tax deductions and “what if” scenarios; there are a lot more “well, maybe” and “it depends” than clear yes or no answers.?So, having an informed, licensed Real Estate CPA can save you a good deal of money in taxes, and headaches from the IRS.

P.S. The Nealson Group, LLC does not disclaim anything about this or any other blog on our website.?See IRS Circular 230.?However, it is our privilege to help our clients achieve the best version of themselves, financially.