You have time to keep money out Uncle Sam’s pocket. With these 3 creative deductions, you may be able to pay less taxes than you thought!
Thankfully you have one more month to get your taxes together. But if you are like most, that really just allows one more month of procrastination!
Why do we drag our feet when it comes to preparing our taxes. Well, probably because paying bills is painful, so we avoid it. It might also be because it requires a lot of thought on very complex concepts – even if you do use an accountant.
If you have ever read the book The Happiness Equation, you learn that our brains are like computers. The human brain has limited processing ability before it needs to be re-charged. And for most of us, tax time takes up an entire day’s charge (If not multiple days) leaving very little room for anything else (especially those tasks we actually enjoy!).
In an effort to take away some of the painful and precious processing time, I’m going to give you 3 powerful, but commonly missed tax deductions for Realtors.
1. Home office deduction
In a Forbes Magazine article, it is estimated that only 13% of Americans with home offices are actually claiming the home office deduction on their tax return. That’s astounding! Why is it that so many Americans have a home office, but don’t put it to good financial use? It’s likely because there is a lot of miscommunication around it, and conservative tax advisors have bought into some old myths.
As a Realtor, you likely pay a fee to use your broker’s office space. However, is that where you spend the majority of your time? Most of the Realtors I know spend most of their time in their home office and very little time in office space. The IRS goes by your primary place of business or where you mostly spend your time working. Especially due to COVID-19, the home office deduction may be available to you.
Further, if you spent money to create your home office space (painting, new floors, sound proofing, decorative fixtures, etc), all of those items would be deductible expenses for you. We now live in a Zoom world, and that background matters. I know I may some improvements to my virtual home office space.
2. Writing off your kids
Do your kids ever come with you to work? Do you enjoy involving them in your day-to-day real estate work?
Let’s face it, kids are just plain better at technology than us. They have been holding iPads for 10 + years now. And if you kids are social media savvy (assuming they are older teens), have you considered hiring your children to run some social media campaigns or consulting for you?
You probably are already giving your kids money to buy that new video game, go to the movies, or hang out at the waterpark on those Summer days. You can make them earn it.
By paying them for their help with your real estate social media pages, you can give them some spending cash, but also give you some business deductions. It’s a win-win. And it doesn’t stop at social media, it could be work organizing files in your home office, shredding documents, or mowing the lawn on your rental properties.
The key here is to add them onto the payroll and treat them as employees. But if you are thinking that you could pay them $100/hour for some added deduction, it must be considered reasonable or what you might pay someone else for the same job.
Either way, you were going to give them the money anyway, you may as else get the write off!
3. Deduct your vacations
You are a realtor, so I know that it’s impossible to go on a vacation without admiring the local real estate!
So, if you are going to do that anyway, make it work to your advantage. If you were to try and connect with a local realtor and buy that person coffee to network, then you have a deductible expense. But if that same Realtor were to show you around to some of that communities most beautiful properties, then you are working your way to deducting your vacation.
Introducing the “Weekend-Sandwich”. Let’s say you were traveling to Scottsdale for some winter warmth. Properties in Salt Lake City, or wherever you may be, have become too expensive relative to your budget. Well, maybe you want to look at some properties during your family trip to the desert.
If you flew in on a Friday and contacted someone in your Scottsdale brokerage office to look at some properties that day, then you could write off your flight, car rental, and hotel for that day only. Unless, you also booked a meeting for Monday, in which you would need to have stayed through weekend to be at that Monday meeting. Now you have a fully deductible weekend trip to beautiful Scottsdale!
Realtors pay too much to Uncle Sam! Take advantage of the deductions available to you to it’s fullest! Let these 3 deductions serve as some additional help to keep your hard-earned income. After all, being a successful realtor is not easy.
If you want more resources on financial planning strategies to make the most of your property and investment portfolios, then give me a call for a complimentary financial plan.
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