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Every hundred dollars a Real Estate Agent finds in deductions saves up to forty dollars in federal and state tax! If you’re a dollar-minded agent and believe you can spend your hard-earned dollars more effectively than the government, it’s essential that you learn what is and is not deductible on your tax return. This article comes from our Real Estate Agent Tax-Cut Library and discusses one of the most significant deductions available to Real Estate Agents: The Advertising Deduction.
The advertising deduction encompasses a broad range of expenses a Real Estate Agents incurs to promote themselves and the properties they sell. Advertising expenses, like any expense, must be Ordinary and Necessary for your business to be deductible. Ordinary advertising expenses are those which are common and accepted in the field of real estate sales. The dollar value of such expenses must also be reasonable, given the nature of your business. Necessary expenses are appropriate and helpful in the sale of real estate. They are purchases that benefit your business - investments that find clients and help you close deals.
Intention Matters: When determining whether a purchase is deductible (ordinary and necessary) ask yourself “why” you made the purchase. The reason you made the purchase is a good gauge of its deductibility. When you make a purchase to help your business (even if it later proves not to), it’s deductible. If, on the other hand, the truthful reason for the purchase is something different than benefitting your business, you may have a tough time proving your deduction to the IRS.
Asking yourself “why” you made a deductible purchase will also help you to categorize it properly. Purchases that educate the public about you and your services promote a listing, find customers, or make these processes more effective are deductible as Advertising Expenses.
Common Agent Advertising Expenses: As mentioned above, advertising encompasses a broad range of expenses related to promoting yourself, your business, and your listings. It includes everything from print media, to signage, to open houses, to designing your website. Below are some advertising expenses common to Real Estate Agents. I have listed them to help you maximize your deductions. They may even spark a new marketing idea! I have also included some deductions that seem like advertising but are deductible as a different expense and a few warnings to avoid raising IRS eyebrows.
Proving Your Deductions: It's not enough to spend money on advertising to claim a deduction. You must be able to prove (the tax-term: substantiate) your deduction if and when the IRS requests. It’s the taxpayer’s responsibility to substantiate their deductions, not the IRS’s job to prove you weren’t entitled to it. The IRS deduction formula is pretty simple: No Proof = No Deduction. For an easy deduction-tracking method, check out our article, Proving Your Deductions, Easy Recordkeeping for Real Estate Agents.
Summary and Invite: We hope this article has helped you understand some standard advertising deductions available to Real Estate Agents. If you’d like to learn more about cutting your most significant expense, TAXES, check out our Real Estate Agent Tax Cut Library. The Real Estate Agent Tax Cut Library includes over eight hours of video broken into twenty-nine searchable volumes and covers every possible deduction a Real Estate Agent can take on their tax return. Our Broker Version will help your entire agency cut their taxes! We also invite you to browse our courses.
All courses and articles are for informational purposes only and do not constitute tax advice. Taxes are complicated - do not act on course information without consulting a professional. Always refer to treasury regulation before making any tax decision. Read the full disclaimer.
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