Know Your Deductions

Aug 11, 2017 by

Whether you’re doing your taxes yourself or you have an accountant. Understanding which expenses are allowed, like mileage and entertainment, will help you avoid overpaying on your quarterly and year-end taxes.

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Open House Deductions

Aug 4, 2017 by

Open Houses are considered a business expense. For events that are provided to the general public, such as a well-advertised open house, you are able to deduct 100 percent of the cost of refreshments.

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10 Must-Know Tax Deductions for Real Estate Professionals

Mar 12, 2017 by

As a real estate professional, you’re likely used to juggling lots of data. But when it comes to tax-time, you’d be surprised to know there are many deductions you may be overlooking. Brush up on the following information to maximize your deductions and save big on expenses. And don’t try to go at it alone; QuickBooks Self-Employed auto-categorizes over 70 percent of business transactions for you, saving you time and money when tax season rolls around.

From online ads to business cards, websites, flyers, signs and even commercials, successful real estate agents are well versed in the gamut of marketing material. But how do you deduct these marketing expenses? The great news is that all marketing fees, even writing and design hire-outs, are deductible. From the agency that designed your website to the copy-editor who proofreads your print material, you can deduct these costs annually.

If you drive 10,000 miles or more annually for your real estate business, you’ll get the biggest tax break if you take the standard mileage deduction, versus tracking every single auto-related expense. In order to take the standard mileage deduction, you will need to keep a detailed log of your driving, including the date and time of your trip, as well as the exact mileage. Sound overwhelming? It doesn’t need to be. You can track this easily with the QuickBooks Self-Employed tool.

If you drive less than 10,000 miles, you may save more by tracking each expense. Learn more about deducting your standard miles versus actual vehicle expenses here.

Office supplies.
Staples, printer ink, photo copies, postage, oh my. It may seem like you’re endlessly shelling out bucks for office supplies. These are tax deductible—as long as you save your receipts. Other office supplies that are deductible are big ticket items like printers, scanners, and computers used for work-only. You can also deduct your office phone line, or the portion of your cell phone that you use for work.

If you feel overwhelmed logging all your receipts, utilize Quickbooks Self-Employed to simplify the process. With this took, you can snap a photo of your receipt to store it digitally.

Home office.
Do you have a home office? You can write it off. You don’t need to have a whole room dedicated to your work—even a nook carved out of the family room or spare bedroom count toward that home-office write off. There are two options when writing off your home office. Many self-employed agents opt for the simplified method in order to make the most of their deduction, but if your home office is huge (think that refinished basement), or you live in an extremely costly area, the “regular” method of tracking your actual expenses may bring more bang to your deduction bucks. You can learn more about each approach here.

Desk fees.
If you pay a desk fee at your office or brokerage, then you can write this fee off. Using Quickbooks Self-Employed, you can set a rule to automatically categorize your desk fee as an expense, whether its monthly, quarterly or annually. However, it’s important to note that if you’re deducting a home office, you can’t also deduct your brokerage desk fee. It may seem unfair if you work both at home and at an office, so crunch some numbers to determine which deduction will yield a bigger benefit.

Meals and entertainment.
It may seem strange to deduct entertainment and food from your taxes, but it’s pretty typical, especially if you spend many lunches shmoozing potential clients or chatting best practices with colleagues. Whether you’re traveling or catering to clients in your home-town arena, you can deduct 50 percent of your total expense, which includes tax and tip for the meal. If you threw an open-house, you can deduct 100 percent of your spend on food and refreshments.

Membership fees.
As a real estate professional, your state license renewal, professional memberships, and MLS dues are all tax deductible. Business insurance, E&O insurance and any real estate taxes necessary for your business are also fully deductible. The only membership fees not deductible are those attributed to lobbying or political advocacy. Click here for more information on what is deductible.

Software and tools
From lead-generation tools to CRM software, the majority of your business tools are tax deductible.

If you’re traveling for a real estate event you will likely be able to deduct your transpiration and accommodation costs. Be sure to properly track your travel info using Quickbooks Self-Employed. With this tool, you can track travel expenses immediately with a simple click of a button.

As the industry shifts, successful real estate professionals need to stay on top of their education to remain relevant. In many states, continuing education is a requirement for real estate professionals. Whether you’re attending classes, conferences or trade shows, or shelling out for coaching, track these expenses and deduct them at tax time.

In order to make the most of your tax deductions, consider using QuickBooks Self-Employed to automatically track expenses and be fully prepared come tax time.

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Real estate deductions on the chopping block?

Sep 24, 2013 by

Lawmakers weigh tax reforms that are more far-reaching than expected

Media attention has been focused on Congress’ partisan food fight over shutting down the government and defunding Obamacare.

But outside the spotlight last week something potentially more important for real estate was taking shape on Capitol Hill: a tax reform outline being put together by the Republican chairman of the House Ways and Means Committee that could bring more far-reaching changes than most observers had expected.

Though Democrats on Ways and Means were shut out of meetings — as were most congressional staff members in order to keep the lid on the details — some hints of where committee Chairman Dave Camp, R-Mich., is taking his tax code overhaul plan managed to seep out. These could change as the politics of the legislative effort morph over the coming several weeks, but here are a few items mentioned by sources with at least limited access to participants in the process.

  • Camp and the Republican majority on Ways and Means may attach a tax reform timetable and broad objectives — but almost no specifics on cuts and changes — to the upcoming debt ceiling bill that Congress must consider before mid-October.
  • The Republican effort continues to be focused on a massive streamlining of the code that would reduce current tax brackets for individuals to just two: 25 percent and 10 percent. Corporate rates would also have a 25 percent ceiling.
  • Three key principles emphasized by Camp are guiding the bill: Besides the lowered rate brackets, the tax code revision must be revenue-neutral and “distributionally neutral.”

Revenue neutral means that the legislation will not increase total federal tax dollars collected. (Many Democrats, by contrast, prefer to see tax reform raise revenues in order to help pay down the federal deficit.)

Distributionally neutral means that whatever pain is inflicted through the loss of previous tax benefits, no taxpaying income group should be disproportionately harmed or helped at the end of the process. Put another way, people now paying a top rate of 39.6 percent shouldn’t make out like bandits simply because tax reform lowered their marginal rate to 25 percent. They’ll have to pay for it elsewhere.

  • All current deductions and credits are on the line — including all current benefits enjoyed by real estate — because the cost of lowering tax brackets is extremely high. The congressional Joint Committee on Taxation has estimated that simply lowering individual tax rates to 10 percent and 25 percent would cost the Treasury close to $ 3.5 trillion in revenues over the coming decade. Reducing corporate rates to 25 percent would cost more than $ 1.2 trillion. Phasing out the much-despised alternative minimum tax (AMT) would cost still another third of a trillion over 10 years.

Where to find these trillions for lowered brackets has been the key problem confronting Camp — and to some degree fellow tax reform drafters in the Senate Finance Committee — for months.

By some estimates, even if legislators propose eliminating all current deductions and credits altogether — including the mortgage interest write-off — the additional revenue gained might not fully offset the losses to revenue caused by lower tax brackets. Insiders say a draft bill with specific cuts and transition rules already exists or is close to completion. What goes and what stays are the trillion-dollar, politically explosive questions.

Capitol Hill specialists in real estate and housing say Camp’s need for revenues in giant quantities — plus his emphasis on distributional neutrality — point to some harsh possibilities for housing write-offs. The real property tax deduction, for example, is at risk, in part because it’s clearly skewed to owners of homes in high-cost, high-tax states and is a rich source of revenue — estimated around $ 30 billion a year. The mortgage interest deduction is also an inevitable target — more than $ 70 billion a year — but some sources believe Camp is considering a broad-brush approach to deductions in general by limiting write-offs to a fraction of what they are currently — possibly even below the revised tax brackets.

Under this scenario, homeowners who currently write off mortgage interest at 28 percent might instead write it off as if they were in, say, a 20 percent marginal bracket. Ditto for other big-ticket deductions like charitable contributions — and possibly for all deductions, according to one veteran lobbyist. The same lobbyist said there is a possibility that Camp’s bill will eliminate preferential capital gains treatment completely in a system where 25 percent is the top rate anybody pays, whether for ordinary income or for long-term investments including real estate.

“I think a lot of people could be shocked” if and when they learn about what’s been under consideration in the House, the lobbyist said. That, however, would happen only if Camp goes public with the details of his bracket-reduction plan and moves for a committee markup of the bill this fall. He has said he wants to do that, but there’s little time left on the legislative calendar for a debate as groundbreaking as fundamental tax reform.

If instead he opts for a general statement of objectives and timelines as part of a debt ceiling extension bill — with action on tax reform not slated until 2014 — the most controversial provisions of the bill might not be opened to attack by opponents who will be incensed by the loss of long-cherished tax benefits.

Where’s this all going? At the moment it’s hard to predict. But the big change I am sensing from earlier this summer, when the drafting process had barely begun, is that the people who represent real estate and housing interests on Capitol Hill are more concerned about what’s underway than they were before.

Even with liberal “transition rules” that ease in tax reform changes over the course of a decade, at the end of the day will housing be better off — or worse– in a system where deductions are sharply limited but tax brackets are lower?

Who knows until we see the details.

Ken Harney writes an award-winning, nationally syndicated column, “The Nation’s Housing,” and is the author of two books on real estate and mortgage finance.

Copyright 2013 Inman News
Inman News

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