home office, some of your expenses may be deductible. This depends on the square footage of your office spaAs self-employed individuals, realtors have a lot to figure out at tax time. Filing self-employment taxes is different than filing as an employed individual, especially if you’re not sure about your deductions or what forms you need.
If you want to be stress free at tax time, it’s important to stay on top of your tax documents all year long and avoid overpaying on your taxes.
What Is the PATH Act?
The Protecting Americans from Tax Hikes (PATH) Act was passed by the Obama Administration in 2015 to provide tax relief for business-related purchases for realtors. Under the PATH Act, the IRS adjusted Section 179 deductions to allow some work-related expenses like a vehicle used to travel for work.
Some of the common deductions for realtors and real estate agents include:
Education
It’s important for realtors to have continuing education to keep up with the changes in laws and regulations. This education may be deductible, including real estate training classes or real estate courses.
Travel Expenses
If you use your car for work, such as driving to real estate showings or to put up for sale signs, the expenses may be deductible. This could include your vehicle’s mileage, maintenance, fuel, and purchase or lease costs.
Marketing
If you use marketing materials to promote your business, including digital campaigns to attract home buyers and sellers, it may be deductible.
Real Estate License
Your real estate license and renewal costs are work-related expenses and may be deductible. This may include association dues.
Utilities
Home office utilities may be deductible, such as your phone bill, internet service, or electric bills, if they’re required to do your job. This also applies if you have an office location.
Insurance
Any business insurance you carry, such as general liability insurance, may be deductible if you cover the costs and not your employer.
Home Office
If you work from a ce and how much you use your home office for work purposes.
How to File Taxes as a Realtor
Your deductions are a big part of the process of filing, but here’s everything else you need to know.
Gather Your Records
Compile all the documents and records you have for your taxes to keep it on hand to reference. This includes your expenses, earnings, receipts, and any documents for your applicable deductions.
Consider Your Employment Status
Though realtors and real estate agents are usually self-employed, they sometimes work for others. The tax situations are different if you’re self-employed or employed, however.
As an employed individual, you have your taxes automatically withheld from your wages by your employer. When you file taxes, you ensure that your employer has paid the correct amount.
As a self-employed individual, you are responsible for your own taxes. They’re not automatically taken out of your paycheck. You must declare your income and pay your quarterly taxes as well.
Self-employed taxpayers have a 1099-MISC, which is like your W-2. You’ll also use Form 1060 for your annual income tax. You likely need to file a Schedule SE for your tax calculations and a Schedule C to calculate your profits. Form 1060-ES helps you estimate and pay your quarterly taxes.
If you live in a state that collects income taxes, you will have to file your state income tax forms. The requirements vary by state, and some states don’t require income tax. These currently include Alaska, Nevada, South Dakota, Texas, Washington, Wyoming, and Florida.
File Your Taxes
You have options to file your taxes. You can rely on an account, which is expensive and still requires organization on your part, or you can do it yourself with a tax software solution. This option is cost effective and makes the process quick and simple. Some solutions include self-help features to reduce any possible mistakes, such as common questions like, “do LLCs get a 1099?”
Make Quarterly Tax Payments
You should pay your estimated tax payments each quarter, which is on the following dates?
- January 15 is the deadline to pay taxes on your earnings from September 1 to December 31 of the previous year.
- April 15 is the deadline to pay taxes on your earnings from January 1 to March 31.
- June 15 is the deadline to pay taxes on your earnings from April 1 to May 31.
- September 15 is the deadline to pay taxes on your earnings from June 1 to August 31.
These payments include not only your estimated taxes but your Social Security and Medicare payments. These are included in the withheld taxes for employed individuals, but they’re your responsibility as a self-employed taxpayer.
Helpful Tips for Realtor Taxes
Here are some ways you can make your tax filing time as stress-free as possible:
Stay Organized
Organization is key to having a smooth experience at tax time. Throughout the year, keep your tax forms in one easily accessible location. Make sure you take pictures of your receipts throughout the year to track your expenses and store them in a folder. You should also have your old tax forms and documents on hand in case you need to reference them.
Take Your Time
If you’re coming up on a tax deadline and stressed out, you’re likely to make mistakes that can lead to a lot of additional fines and penalties. Common mistakes may include a missing name, an illegible name or address, forgetting to add a postage stamp, or forgetting to sign. You could also miscalculate your income or expenses, leading to underreporting or underpayment. If this happens, you could deal with serious fines and penalties.
Don’t Forget Your Tax Credits
There are several tax credits you may be eligible for to reduce your tax liability and save on your tax bill. These vary according to your circumstances, but consider tax credits for education, dependent car, the child tax credit, and the earned income tax credit.
Prepare for Tax Season
No one likes tax season, but when you’re a self-employed realtor, you could have a lot more responsibility and stress. If you plan for tax time throughout the year and use tools like tax software for real estate accounting, you can minimize errors and streamline the process when it’s time to file.
