If you’re a real estate agent in Glendale, California, tax planning is essential. The new 2018 Tax Reform made significant changes to the tax liabilities and benefits afforded to self-employed persons and businesses including real estate agents.
Now more than ever, it’s important to plan ahead so you can take advantage of certain deductions and money-saving opportunities come tax season. With the new tax laws, it’s crucial to meet with your trusted local tax advisor to see how the new federal regulations impact you and your real estate business specifically.
But to get you started, we’ve listed our top 5 top tax planning tips for Glendale real estate agents:
1. Don’t Miss Out on Common Industry Expenses
Like most industries, Real Estate has its own business expenses unique to the industry. In order to take advantage of these tax deductions, you must start saving receipts and tracking write-offs early. This includes costs like: marketing materials, open house flyers, real estate signs, real estate board dues, real estate licensing and renewal fees, multiple listing service (MLS) dues, brokerage desk fees, and errors and omissions insurance not paid by your broker.
2. Track Your Car Usage
When you’re a real estate agent, you spend a lot of business time in your car driving to showings, meeting clients, and checking in on properties. Did you know you can write-off the business usage of your personal vehicle? Gas, mileage, maintenance, tolls, parking fees, and more are common vehicle deductions real estate agents take. The IRS requires comprehensive records if you’re planning to take advantage of the vehicle deduction, so it’s important to keep a detailed log of all business miles and expenses. Leaving a notebook in your glove box is an easy solution to make sure you don’t forget. An alternative to a notebook is to use one of the many mobile apps that automatically track your miles and handles the mile logging for you.
3. See If You Qualify for the 20% Pass Through Deduction
The 2018 Tax Reform created a significant law for business owners known as the 20% Pass Through Deduction that some real estate agents may qualify for. This deduction allows for
20% of your Net Income from your Qualified Business Income to be deducted. You may be ineligible for this deduction if your taxable income is above $157,500 as a single filer or $315,000 as a married filer, be sure to consult with to your local tax advisor to determine eligibility.
4. Take Advantage of Section 1031
If you’re a real estate investor, it may be in your best interest to see if you qualify for the Section 1031 tax-free exchange. This law allows real estate investors to trade one property for another without paying taxes. The rules for this 1031 exchange are very specific and you must be classified as an investor, so make sure to check with your local tax advisor to see if you qualify. If you do, you can use all of the profits from the sale to reinvest in your next property.
5. Deduct Your Home Office Usage
Do you work out of a home office? If so, you may be entitled to deduct your home office expenses from your tax return! Even if your broker provides office space, you can still qualify for the home office deduction and reduce your taxable income. Eligible deductions include home ownership costs, rent, utility bills, insurance, maintenance, and more! The IRS sets strict requirements for this deduction, so its best practice to make an appointment with your local tax advisor to see if you qualify.
***Are you a Glendale real estate agent looking to better plan your taxes and make the most of your potential deductions and credits? Call us today at (818) 242-4888 or schedule your free 30-minute consult now. Robert Hall & Associates is a leading corporate and business tax preparer and consultant serving Pasadena, Glendale, Burbank and the Greater Los Angeles area. Our team of enrolled agents can guide you through the business tax planning process and advise you on the documentation you will need.