As the 2016 tax season comes to an end, you become your own private investigator: searching every crevice, purse, drawer, or shoebox imaginable to find every last receipt or document needed to show proof of purchase for business expenses. That’s the burden of tax preparation: whether you own your own business or work as a self-employed employee (1099 filing status), you have to show proof of all your business expenses. Knowing what you can deduct and keeping track of these expenses throughout the year can take the hassle out of filing your taxes.
As a real estate professional, you need to know which of your expenses are tax deductible. Being aware of possible deductions can help you know which receipts to save and what activities and expenses to document. (*We advise everyone to consult their tax professional regarding their specific situations and to find more information about applicable tax deductions.) Here are some tax deductions you may qualify for.
According to the IRS website, vehicle deductions vary. First, you have the choice of adding up all expenses like gas, repairs, oil, and (yes, even) car washes, or you can use the standardized mileage deduction. The way the IRS standard mileage works is for every mile driven, a certain dollar amount is applied to it. Second, if you are leasing, you can expense the complete payment of your car or deduct annual depreciation if owned. Finally, if you don’t own a car, Uber and taxi expenses are deductible.
Home Office / Supplies
If you have a dedicated work space in your home (not including your living room or kitchen), a portion of your rent / mortgage based on the size of the space is deductible (please see the IRS website for home office specifications). This is also applicable to internet, cable, and phones used within the home. Office supplies like staples, paperclips, and stamps used in the tax year can also be deducted. Office furniture like desk, chairs, and bookcases can be deducted all at once or by depreciation.
Travel / Meals / Entertainment
Only 50% of your total travel, meals, and entertainment expenses are deductible. These items need to be business related to be applicable for deduction.
Legal and Professional Fees
Any fees paid to attorneys, accountants, consultants, and other professionals are deductible, as well as: annual membership fees, desk fees, and continuing education.
Marketing / Advertising / Sales
If your marketing and advertising are done effectively and efficiently, your ROI can truly be substantial because all of your marketing and advertising costs are tax deductible. This includes your Homes.com account and any dollars spent on social media advertisements. You can also deduct client gifts (up to $25 per gift), for sale / rent signs, and any software you use to conduct business.
Now that you know what kind of receipts and documents you need to save, throw them away (in the recycling bin, of course). Why? Because tax preparation doesn’t have to be a headache; there’s a device that every real estate agent carries on them at all times that can make your tax preparation easier: your smart-phone.
The apps listed below have the capabilities to save all your receipts, connect to your bank and credit card accounts to update expenses, and even track your miles without the need of excess paper or hassle (and the prices paid for these apps are also tax deductible). It might be too late for the 2016 tax year, however, it’s never too late to jump start your 2017 tax preparations.
ShoeBoxed (Android, iOS)
One of the simplest apps you can own, but it takes the hassle out of filing receipts. Just snap a pic and your receipts get digitally copied into the app. The app then sorts, categorizes, and archives all images. There is mileage tracking software, but it only tracks mileage with the use of addresses on receipts and calculating distances by using your phone’s GPS to create an “accurate” distance between locations. Finally, for those that feel that bookkeeping, taking pictures of receipts, takes too much time, get one of their prepaid envelopes and fill it with all your receipts. Then let an employee of ShoeBoxed do the work for you.
Mile IQ (Android, iOS)
Mile IQ tracks your mileage through the use of your phone’s GPS, so there’s no need to manually input the distance driven. GPS tracking also works in the background, meaning that you don’t even have to open the app to track your trips. By swiping left or right on the home screen of the app, you choose between personal or business trips. While on your trips, Mile IQ automatically calculates the value of your trips according to IRS standards and displays it on the home screen.
Hurdlr (Android, iOS)
Hurdlr is the app that does it all. It automatically keeps track of all your expenses by linking to your accounts. Hurdlr then categorizes the expenses and creates deduction reports. The mileage tracker is simple with auto stop and start features linking to phone’s GPS; for those agents without a vehicle, Hurdlr links to your Uber or Lyft app to keep updated records. Finally, with real time tax estimates associated with the city and state you live in, you can view potential tax savings the coming year.
QuickBooks Self Employed (Android, iOS, Windows)
Created with a user-friendly interface, QuickBooks Self-Employed comes both in app form and web form, and is a one-stop shop for tax and finance management. Link it to your bank account or credit card to find business deductions, auto-track the miles you drive, and create automated tax reports that you can send to your account or sync with TurboTax for easy filing during tax time. Plus, when you take a photo of any receipt, it will match it to your expense in the app. Also, as a partner of the National Association of Realtors Benefits Program, Realtors get a discount on the service.
Expensify (Android, iOS)
Expensify’s greatest feature is that it is FREE! For a free app with no in-app purchases, you can do just about everything that the apps mentioned prior can. By snapping pictures of your receipts, you enable the app to upload your info for record keeping. You can also link credit cards for updated expense reports and track your mileage. If you are hesitant to spend too much for a mobile app, this is a great starter.
Choose an app, download it, and start tracking your expenses now to make filing your taxes for 2017 a breeze. In the meantime, it’s time to find a new buyer to drive around town to test your mileage tracking app! Connect with local buyers with Homes.com’s Local Connect; secure your zip code and get connected.