There are several easy, it-would-be-a-crime-to-miss-‘em tax deductions that every real estate investor should know about. What are they? I’ve got them all right here for you, all your tried-and-true tax deductions you won’t want to forget come tax time.
Home Office Deduction
Home offices not only make your commute a lot shorter, but also qualify you for a tax deduction of $5 per square foot for offices larger than 300 square feet, $1500 maximum, through the IRS’s Simple Home Office Deduction. Have a large office, or live in a high-cost area? You can also take the regular deduction, where you track your actual expenses. For the IRS to consider it, a home office must be used exclusively and regularly for your real estate business: a desk shoved into the corner of your TV room is not going to cut it, folks. Also, be sure you have no other fixed location where you regularly perform real estate-related work.
You can eat, drink and be merry when you know your business meals will qualify as a tax deduction. How does it work? You can deduct 50% of your total expense—which includes tax and tip for the meal—if business was discussed immediately before, after or during the meal. Meals consumed during travel for business or while generating referral business also count. Putting on a spread for an open house? You can deduct 100% of the cost of food. The best way to ensure you keep track of your meal expenses is to save receipts both diligently and digitally.
Business Travel Deduction
Another great deduction to keep in mind is the business travel deduction—but, what counts as business travel? It’s more flexible than you think. Sure, going to professional development events naturally counts, but what about a family vacation where you also do some business? The key is to spend at least half of your tip’s days on business-related activities. A vacation day turns into a business day when you spend four or more hours in work related tasks.
Do you drive 10,000 miles in a year for business purposes? Great—that’s the amount of business-related driving miles you need to hit to take the IRS’ standard mileage tax deduction of 53.5 cents/per mile.
Fees, Licenses, Memberships & Insurance
Annual fees are common costs of doing business, and the IRS lets you deduct them. Some examples are your state license renewal, professional memberships and multiple listing service (MLS) dues.
Your office still isn’t finished saving you in the tax department: you can claim other office-related expenses, like stationery, photocopies and any other supplies needed to run your business. Bigger purchases that can be deducted in full include furniture, fax machines, copiers, computers and your office phone.
If you invest in marketing and advertising (who doesn’t?), you can deduct the marketing and promotional items themselves, as well as the production costs to make them.
Let The Real Estate CPA Help You Hunt Down Every Last Deduction
You deserve to keep more of your hard-earned money, and I can help you do just that by ensuring every deduction you qualify for is taken. Want to make tax time a happier time? Give me a ring—let’s set up an appointment!