Whether you’re preparing your taxes on your own as real estate professional or having a tax strategist CPA help you, here are some tips:
Don’t forget your mileage.
Many real estate agents leave money on the table when it comes to their mileage. Depending on where you work on a regular basis, the tax deduction may include attending meetings, putting up for-sale signs, running business-related errands and completing floor time at your broker’s office.
How do you classify the people on your team?
Make sure you’re not classifying W-2 employees as independent contractors. Independent contractors should be issued a 1099 form, while actual employees get a W-2.
If they are fellow REALTORS® and make commissions, they can be 1099s. However, depending on the state, the commissions are usually paid by the broker, not their ‘team leader.’ If they are paid to perform other duties outside that of being a licensed REALTOR®, they may be deemed an employee for those items and all that goes along with payroll.
The same applies if you hire someone to perform clerical or other office duties.Most people tend to want to go with the 1099 route to avoid payroll-related issues. That is a very bad assumption to make.
A better option is to stay within the law by classifying your employees correctly when they are hired or consulting a tax professional to make the proper changes to your payroll.
Watch how you expense gifts.
In a people-facing role, it’s important to remember the small touches that make your clients feel appreciated. Yet, watch how you’re expensing gifts you buy.
Gifts are big issue. Gifts are deductible to the extent of $25 per person per year. Or, if your client is a couple, then it’s $50 per couple per year.
That means if you’re buying a big-ticket item for your clients, the amount you can claim for the 2019 tax season is limited. That is because it’s still classified as a gift.
You can still save for retirement.
Many real estate professionals might not have a 401(k); however, this doesn’t mean that you can’t save for retirement come tax time. One consideration is to fund an IRA. If you’re at the start of your career and still in a lower tax bracket, consider funding a Roth IRA.
Roth IRAs don’t provide a tax break for contributions, but when you pull the money out of the Roth IRA, it’s usually tax-free. If you’re in a lower tax bracket right now and don’t need the tax break, you might want to consider this as an option to save for retirement.
If you can’t organize your taxes before the deadline, file for an extension.
Time management can be tricky. If Tax Day in 2019 is coming up too soon for you to get organized, you can file an extension so that you can file taxes at a later date, six months in the future. Remember, this extension doesn’t allow you to pay your taxes at a later date. You’ll have to pay an estimate of what you think you’ll owe on time. Then when you file your taxes, you’ll be able to account for any adjustments.
Don’t forget about your education deductions.
Real estate continuing education and professional development is a great way to stay competitive. Your education is tax-deductible, including online courses, classes, trade shows, conferences or coaching.
Call Williams & Kunkel CPA today in Flower Mound at 972-446-1040 to have a chat and find out how you can save money on your taxes as a real estate professional.