Lower Your Tax Bill with These 17 Deductions for Real Estate Agents

Millions of people work as licensed real estate agents throughout the United States each year. Most are self-employed and operate their real estate business as sole proprietorships.

A sole proprietorship refers to any business with a single owner. If you are a small business owner with all the authority over what happens to your real estate company and how it runs, you are the sole proprietor of that business.The IRS treats real estate agents as self-employed individuals if:

• Substantially, all payments for your real estate agent services are directly related to sales or other output rather than to the number of hours worked

• Your services are performed under a written contract, providing that you will not be treated as an employee for Federal tax purposes

Working on commission can make tax time difficult, making it essential to take advantage of every tax deduction you're eligible for, which reduces your taxable income. But where should real estate agents start with claiming applicable tax deductions?

Use this excellent guide to lowering your real estate tax bill for detailed explanations of the deductions you should consider embracing. Our curated real estate agent tax deduction recommendations provide the insights your real estate business needs to reduce tax liability while maintaining compliance. 

17 Tax Deductions for Real Estate Agents

Good recordkeeping will support the tax deductions you intend to claim. We recommend saving receipts, statements, and additional supporting documentation to ensure a streamlined tax preparation and filing process.Real estate sole proprietors file IRS Form 1040, U.S. Individual Income Tax Return. Form 1040 calculates your federal taxable income and tax liability.

You should also file schedules to claim real estate tax deductions on IRS Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship), and Schedule A (Form 1040), Itemized Deductions.

Self-employment deduction

Because most real estate agents operate as sole proprietors, they will be responsible for paying the 15.3% self-employment tax on their business income. This tax contributes to two Federal programs: 12.4% of Social Security (old age, survivors, and disability insurance) and 2.9% of Medicare tax (hospital insurance).

Real estate agents operating as sole proprietors can deduct half of what they've paid in self-employment tax to reduce their federal taxable income.

Use IRS Schedule SE (Form 1040), Self-Employment Tax, to calculate your self-employment tax and the deduction. You'll then report your self-employment tax deduction on your personal income tax return.

State and local taxes

There are state and local taxes (SALT) you may be able to deduct to reduce your taxable income. SALT deductions are capped at $10,000 in total or $5,000 if you're married and filing your income taxes separately. The IRS has clearly defined deduction categories:

• State, local, and foreign income taxes or state and local general sales taxes instead of state and local income taxes

• State and local real property taxes

• State and local personal property taxes

The SALT deduction received its current limits as part of the Tax Cuts and Jobs Act of 2017. The current SALT limits are set to expire after 2025, and it's unclear whether these caps will be maintained or replaced. 

Sub-commissions paid to others

While retaining your entire real estate commission is optimal, there are instances where that might not be possible.For example, you will pay sub-commissions to people, such as an employee or even a competing agent, who help you sell a piece of real estate. While sub-commissions can be sizable, there is a silver lining. The sub-commissions you paid can be fully deducted as a real estate business expense. 

Business expenses: office supplies

The office supplies you use support your real estate activities and help you maintain smooth operations. Your office supplies are also tax deductible, including: 

• Pens and pencils, notepads, and staplers

• Printer ink, envelopes, paper, and toner

• Computer monitors and peripherals, such as printers

You can deduct other business-related supplies and equipment, but you should track items costing more than $2,500 separately and follow applicable depreciation rules.

Home office deductions

If your base of real estate operations is from a home office, you can typically deduct that home office expense as long as you meet eligibility requirements. To qualify, you must dedicate a portion of your house or apartment exclusively for business use and cannot have a primary workplace outside your residence.

Determine your home office deduction using the simplified or regular method: 

• Simplified method. Multiply your home office square footage by $5. The maximum simplified home office deduction is $1,500 or 300 square feet.

• Regular method. Determine your total home-related expenses to use this method, including rent, mortgage interest, maintenance, and utilities. Allocate a portion of the costs to your home office based on the percentage of the area dedicated to your workspace. For example, if your home office takes up 15% of your home’s total square footage, your deduction equals 15% of your total home expenses.

Calculate and report your home office deduction using IRS Form 8829, Expenses for Business Use of Your Home. 

Office space rental

Real estate agents renting office space outside their home or apartment can claim full rental payments as a deduction. Eligible deductions extend to commercial rent and memberships to less traditional coworking spaces.The rent expense deduction also applies to other real estate business rentals, such as equipment, storage space, and short-term vehicle rentals.

Vehicle deductions

Expenses related to the vehicle you use to show prospective buyers a piece of real estate you're selling and other business activities can be deducted using the standard mileage rate or the actual expense method. If you use the vehicle exclusively for business, you can deduct all the costs associated with its operation. You can only deduct business costs if it is a vehicle used for personal and business use.

You can claim a deduction per mile driven for business purposes, although there are exceptions. For example, everyday commuting from home to your office is ineligible. The 2025 standard mileage rate is 70 cents per mile.

If it's more advantageous, you can choose to deduct actual car expenses. Eligible deductions include vehicle insurance, repairs, maintenance, gas, and fuel.You can deduct other travel expenses, including tolls, parking fees, and depreciation, via both methods. However, if you use the standard mileage deduction, you must follow restrictions on depreciation expense deductions.

Marketing and advertising expenses

Marketing and advertising the properties you're currently selling is an essential part of running your real estate business and represents tax-deductible business expenses.

Online ads promoting an open house, printed signage, brochures, business cards, billboards, radio and TV spots, among other tried and true forms of real estate marketing and advertising, qualify. Typically, the costs of growing your real estate business and developing your brand qualify for tax deductions.

Business meals

You can take a tax deduction for qualifying business-related meals, but not every meal you have while working is eligible. For example, what you pay for a normal lunch or a beverage in your real estate office does not qualify.

This deduction applies to client meetings and meals during work trips. The IRS imposes a 50% limit on most business meals and doesn’t allow deductions for what it considers lavish or extravagant dining costs. 

Professional services: valuations, legal fees, CPAs, etc.

Real estate agents require professional services to do their jobs, some of which are unique to their profession. Legal service fees, inspections, and valuations associated with the properties you've listed can be claimed as business expenses. However, more general professional services are also tax-deductible.

For example, if you use the services of outsourced accountants or bookkeepers for tax preparation and record-keeping, those fees represent tax write-offs. 

Networking events: seminars, workshops, etc.

The fees for seminars, workshops, or other real estate networking events you attend for business purposes are usually eligible for tax deductions.  If you're attending a seminar or workshop to address what is considered a basic real estate agent requirement, that expense is typically ineligible for a write-off. 

Education

Agents who complete courses or are engaged in continuing education to build new skills or maintain their professional real estate licenses beyond a basic, required skill can deduct the fees as business expenses.

The new skills you are building should pertain to your real estate business. For example, if you are completing courses and leveling up your knowledge for a career change, the fees you've paid are ineligible and must pertain to your current industry. 

Realtor dues and subscriptions

A vast majority of licensed real estate agents belong to the National Association of REALTORS (NAR), a body whose mission is to "empower REALTORS as they preserve, protect and advance the right to real property for all."

The professional membership fees you've paid to NAR are tax-deductible, as well as subscriptions to real estate industry publications and business software and services you use. 

Licenses and fees

Real estate agents must renew their licenses to continue to be able to sell properties. Some states require license renewal yearly, while others allow up to four years between renewals. The renewal process typically involves meeting certain educational criteria and submitting an application for renewal and a fee.

Like the renewal period, fees vary by state and can be as much as a couple hundred dollars. Fees associated with your real estate license renewal can be written off. 

Professional group or union

It's common for licensed real estate agents to be a part of several unions, professional trade groups, and associations.

Like NAR membership fees, the dues or fees you've paid to trade groups, associations, and unions are tax-deductible expenses for practicing real estate agents. 

Health insurance

Most real estate agents are self-employed sole proprietors and lack access to employer-sponsored healthcare coverage.Because of this, you can establish a health insurance plan for your business and deduct health insurance premiums paid for eligible plans. The self-employed health insurance deduction includes medical, dental, and vision insurance payments. Individuals can also deduct the cost of qualified long-term care coverage.

Use IRS Form 7206, Self-Employed Health Insurance Deduction, to determine your tax write-off.

Charitable donations

While donating to a good cause can make you feel great, being able to deduct a portion of your charitable donation can make you feel even better.

Typically, you can deduct up to 60% of the cash value of your charitable contributions. The charities you donate to must be recognized by the IRS to qualify, so ask about their 501(c)(3) status before donating.

Your deductions must be itemized to qualify for charitable donations. 

Get the Real Deal: Expert Help to Claim All Your Tax Deductions

Reducing your taxable income by taking every tax deduction your real estate business is entitled to is essential. However, gathering your documents and materials, entering data into the correct forms, and submitting them to the IRS on time can be daunting, especially when trying to close your latest real estate deal. That's why many licensed agents and other real estate professionals trust the tax professionals at 1-800Accountant, America’s leading virtual accounting firm, for their real estate accounting needs.

Save time and achieve your annual financial goals this tax season with our suite of affordable, tax-deductible financial services. Schedule a quick consultation–usually 30 minutes or less—to learn how business tax filing and preparation, and advisory will help your real estate business maintain full IRS compliance with maximum tax savings.