What is/isn't tax deductible?

**BostonRE** · 04-12-2007, 03:23 PM

I'm a new agent in the Boston area working for a small private brokerage. I was curious if some experienced agents might have some details on what expenses of being an agent they can deduct on their taxes. Some of this gets pretty expensive especially if you're a newer agent without a ton of listings.

. I've been keeping a mileage log, but beyond that I'm a little clueless.

1) Wardrobe? I had to buy some nicer pants, shirts, and a blazer, does this count?

2) Cell phone...like most people I need one anyway, but it's an essential business tool as well. Can you just deduct the cost of the device and service based on the percentage breakdown of personal/business use? Is Internet service the same way since you obviously need to connect to MLS?

3) What other gadgetry is required for business? Is a notebook a reasonable expense? What about a navigation system for the car?

4) Do any of you guys safely deduct a small portion of your homes for an office? I never really bothered having an office working retail in the past, but there's a small area I've designated for keeping all my paperwork, connecting to the Internet, making phone calls, etc. I always go to clients though...no real need to meet them here.

5) What about the classes and licensing fees?

I also feel a little awkward about my 2006 return. I incurred all my startup expenses in November and December....but it wasn't until this year that I made a dime. I did work all last year but at an unrelated job for which I'm anticipating a return. Can I deduct my real estate job startup expenses from my income for the other job since it's all I had for '06? Any advice is greatly appreciated.

**tarheit** · 04-12-2007, 10:20 PM

I'm not a tax professional so take any advise with a grain of salt (and you may need to consult a professional. Even then I've seen some professionals claim thing that I belive clearly shouldn't be.

General rule, if it's purely business use you can probably claim it. If in doubt I wouldn't raise the red flag. Even if I had a professional preparing it and there was something questionable I probably wouldn't claim it simple because using a prefessional doesn't negate your obligation to pay it (and any fines) should the IRS not allow the deduction.

Originally Posted by BostonRE

1) Wardrobe? I had to buy some nicer pants, shirts, and a blazer, does this count?

I wouldn't claim this. If it was a required uniform (CR21 blazer or something), comopany logo, then that part I would claim.

2) Cell phone, internet

Probably yes. (I've hear pro's say that you only need to receive 1 business call a day on the phone to count it all, but I think it's asking for trouble). If most of the calls are business, it shouldn't be an issue. We have a separate cell for personal phone calls (we dropped our land line) so minutes are kept separate anyways.

3) What other gadgetry is required for business? Is a notebook a reasonable expense? What about a navigation system for the car?

Notebook is certainly reasonable, and you may be able to justify the navigation system. Note though that these deductions probably fall under the 1079 and a separate 'depreciation' form needs filled out as well. Of course the way they've changed it a few years ago, you can pretty much depreciate it out in one year (still have to file the form though) However, you can't claim a 1079 deduction that's more than your gross income. So if you had no income at all, you would have to take this part over at least 2 years.

4) Do any of you guys safely deduct a small portion of your homes for an office?

You can. Be sure it's specifically for business and isn't subject to other uses. This can be something that raises a red flag.

5) What about the classes and licensing fees?

Yes. Can't think of any reason why they can't be.

Can I deduct my real estate job startup expenses from my income for the other job since it's all I had for '06? Any advice is greatly appreciated.

File schedule C for a business profit and loss. If you show a loss you don't have to file the SE (self employment tax), and the loss will carry over to your 1040 and will reduce your taxes from your other job. It's pretty normal for any business to have a loss the first year.

General tip: Keep track of your expenses as you incurr them. And keep track of them in the categories that are found on Schedule C. That way it's a simple mater when it comes to filing taxes, just copy the numbers over and you have the hard part done. I've seen far too many wait till this week and go to their tax preparer with a shoebox of receipts.

-Tim