Business Travel Expenses: Maximizing Tax Benefits for Real Estate Agents

As a real estate agent, showing properties and meeting with clients outside the office are an integral part of the job. It’s important that you keep track of all travel-related expenses you incur so you can maximize the tax deductions you qualify for. By having proper record-keeping and documentation, you can deduct many costs associated with your business travel and save you money on your tax bill.

First, determine what travel qualifies as deductible business for you as a real estate agent. The law makes a distinction between normal commuting to your place of business and travel outside the metropolitan area. Your daily commute back and forth is generally not tax deductible. However, travel from your office to show a property or meet a client would constitute deductible "business travel." The IRS requires travel must be overnight or far enough away from your office area to justify the expense in order to qualify for tax benefits. Plan your travel itineraries with this in mind.

It is necessary to maintain records of all your business travel expenses – down to each individual trip and receipt. The most common deductible travel costs for a real estate professional include:

1. Gas, parking, and/or taxi/Uber/Lyft fees for travel to show properties or meet clients

2. Airfare, baggage, and service fees for travel to obtain listings or attend real estate conferences

3. Mileage put on your vehicle when driving for business purposes (currently $0.66/mile)

4. Business meals and entertainment with potential clients/customers

5. Lodging and rental cars when traveling for real estate business overnight

6. Wear and tear on a vehicle specifically for business use (depreciation over time)

Keep detailed records on a daily basis of each place you traveled, the purpose of the trip, and the specific expenses incurred. Maintain receipts and documentation that tie each expense directly to the real estate endeavor. This is crucial should you be audited so you can prove the purpose of the trip and substantiate your deductions. Be accurate on reporting actual mileage for real estate purposes (plan resets starting and stopping at your primary office).

When traveling overnight for business, keep expenses like lodging, meals, and rental cars separate from any personal expenses. Again, proper documentation is paramount. For car rentals, know that only the business portion is deductible so keep accurate records of dates and mileage. Plan business activities to maximize your time so the primary purpose of your trip is direct business activities. This helps justify full write-offs for tax purposes.

For business meals and entertainment, make sure they are with established or potential customers and necessary for your business development. Details on who you met with and the business purpose of the discussion are required in addition to receipts to qualify for deductions. Strict limits on deductions for entertainment and meals under tax reform make concise record-keeping in this area even more vital.

Consider opening a dedicated credit card and/or bank account for your real estate business travel and expenses. Not only does this help track spending, but also substantiates the expenses later if audited. Simply saving receipts or using your personal card make expenses tougher to prove as legitimate business deductions later. Using a tracking tool like Concur or Expensify can further help you easily capture and organize expenses while on the go.

With proper planning, diligent accounting of costs, and organized record keeping, the travel demands of being a real estate agent can actually save you big on your taxes. By knowing what qualifies as “business” travel and keeping meticulous documentation, agents can deduct hundreds or thousands in travel costs each year and maximize their tax savings.

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