Real estate pros almost never take advantage of all the tax breaks they’re owed, says CPA Greg Antipoff, who is known as “The Real Estate Accountant.” Most of the time, financial misunderstanding and a lack of a system to manage business expenses prevents practitioners from saving more money at tax time, he adds.
But Antipoff is determined to arm agents and brokers with the knowledge and skill to keep more of their earnings. He’ll provide tax tips tailored to real estate pros during NAR’s 2024 Tax Summit, a four-part webinar series held every Wednesday in February by the Center for REALTOR® Financial Wellness. Here are seven important items Antipoff will cover during the summit that will help you save money at tax time.
- Tracking expenses. You need a system to track your expenses, but it doesn’t have to be complex. Simply using a separate, dedicated bank account to deposit all commission checks and pay all expenses can get you 90% of the way there. This helps ensure you aren’t forgetting about items you’ve already spent money on. The Tax Summit will cover a simple system to make sure agents aren’t missing any deductions.
- What’s deductible? The tax code favors small business owners over employees, so real estate professionals—especially rookies—must reframe their mindset when it comes to taxes. For example, employees can’t deduct things items such as their home office, vehicle, meals, travel, business conferences and education—but small business owners can. The Tax Summit will cover all the items you could potentially write off.
- Bonus depreciation on investment property. Pay attention to the phaseout of bonus depreciation as it relates to investing in real estate. Bonus depreciation allows you to deduct a larger portion of the purchase price of a property in the first year versus spreading the deduction out over three or four decades. The bonus depreciation limit for 2023 was 80%, and it is now 60% for 2024. Each year, this will continue to decrease by 20% until is completely phased out. This matters to real estate pros, who rely heavily on property investment to build wealth and retirement savings. The Tax Summit will cover tax advantages for agents investing in real estate.
- Business entity requirements. Real estate pros who operate as an LLC or S-Corp can enjoy further tax benefits. But FinCEN now requires business entities to report certain information under the Beneficial Ownership Information Reporting rule, or BOI reporting. While the reporting itself is straightforward, failing to complete this by the due date can be costly; we’re talking $500 a day. Check with an attorney or accountant to make sure you complete this filing in a timely manner. The Tax Summit will cover tax implications for legal business entities.
- Making an item or activity tax-deductible. There’s no universal list of tax deductions for real estate pros. What is tax-deductible for one agent may not be for another. It all depends on how the taxable item is used. Instead of focusing on a list of things that you can write off, figure out how a particular expenditure can lead to generating more money in our business. This is figured out by asking, “How do I make it tax deductible?” Use a 3D printer as an example: What if you were to 3D print an ornament of your client’s actual home—not some random house—and gave it to them as a gift? Your client is likely to share this ornament with their sphere, which could lead to referral business. Now, it’s tax-deductible. The Tax Summit will cover how to capture every tax break you’re owed.
- Requirements for home office deductions. The home office deduction is a great way to write off a portion of the expenses associated with your home. But keep in mind that your home office needs to be a dedicated space to take advantage of tax breaks. It cannot be your kitchen table where you also eat dinner or have family game night. Also, having desk space at your brokerage’s office doesn’t prevent you from taking a home office deduction. In fact, having a small office at your brokerage can increase your automotive deduction. The Tax Summit will cover how to get more out of your tax deductions.
- Investing in retirement. From the start, agents should be allocating 10% of their commission checks to investing. These funds can be used to invest in things like stocks, bonds and mutual funds, or you can let these funds build up to be used as a down payment on an investment property. The Tax Summit will cover retirement funding for real estate pros.