Tax Season is here! Doing taxes can be a daunting task when you are a 1099’d independent contractor. Below are my top 6 Tax Tips for Realtors. Read below to find out how can you prepare, and what is essential? Don’t forget taxes need to be filed by April 15th, just 3 months from today!
- The Journey Of One Thousand Miles Begins With A Single Deduction:
Don’t leave money on the table when it comes to your mileage. One of the unique aspects of being a realtor is the relationship building that takes place while taking clients to view listings. While this is prime time to get a feel for what matters to the clients you serve, the miles add up.
The mileage that you can record doesn’t only count for listing appointments; you can also deduct mileage that includes attending meetings, putting up for-sale signs, running business-related errands, and completing floor-time at your brokerage office.
There are a few management tools on the market that you can use to track your mileage, check out some options HERE:
- Team Labels Matter:
Team members who perform clerical work and team members who earn commissions are two different entities. Make sure when you’re building your team, you’re not classifying W-2 employees as independent contractors. Fellow Realtors® who make commissions are independent contractors should be issued a 1099 form. Administrative employees get a W-2.
Make sure you stay within the law and avoid issues before they start by consulting a tax professional to make proper changes and additions to your payroll.
- Be Aware Of Your Gift-Giving:
The personal touches in real estate can seal the deal with a customer and make them feel genuinely appreciated. Gift expensing has specific rules and guidelines for deductions. Gifts are usually deductible to the extent of $25 per person per year unless your client is a couple, in which case it’s $50 per couple per year.
- Retirement Can Still Be A Priority:
While Realtors® don’t typically have a 401-(k), a tax-advantaged, defined-contribution retirement account offered by many employers to their employees; there are still ways to save. One consideration is to fund an IRA. Roth IRA’s are a great investment option when you are first starting in your career because you are typically earning money in a lower tax bracket. A Roth IRA is also a great choice because your post-tax income funds them.
- Homestead Exemption:
Homestead Exemptions vary from state to state, but, in Florida a $25,000 exemption is applied to the first $50,000 of your properties assessed value so long as the property is your permanent residence. Having a homestead exemption also means you qualify for (SOH) Save Our Homes Cap program which was establish in Florida in 1994. Meaning that your overall assessed value can only increase to a maximum of 3% each year, so long as your property remains your primary residence. If you already have a homestead exemption on your home, now would be a good time to reach out to your clients from the past year and remind them that they have until March 2nd to apply for a 2020 exemption. For more about homestead in Palm Beach County, Florida Click HERE.
- If You Can’t Meet The Deadline, File For An Extension
April 15th is right around the corner and time-blocking is tricky. We usually start with the best of intentions with managing our time, but sometimes life gets in the way. Distractions can cost you, and extensions don’t give you a free pass to skip out on paying taxes. If Tax Day 2020 is coming up too soon for you to get organized, there’s no need to stress, as extensions are always an option. But keep in mind, extensions don’t mean paying taxes at a late 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.
You don’t have to go-it-alone, tax professionals are the experts, and are here to help. Outsourcing tasks to keep your business running at its best can help you avoid mistakes that can be costly for you and your business.