If you’re a real estate agent, you’re putting more miles on your vehicle than most other business owners. Constantly traveling to and from your office and home, real estate properties, home showings, listing appointments, and more; it adds up the miles quickly! In order to be in accordance with the IRS regulations when it comes to driving expenses, there are a few things you have to keep track of for your deductions to count.
Tips on Tracking Mileage and Deducting Vehicle Expenses as a Real Estate Agent
- Keep a business mileage log. Real estate agents’ routes are unpredictable. Unlike many other business owners, they aren’t simply driving to the office and around town to run errands every day. Some days they are in the car for hours, driving to locations they’ve never been and perhaps will never go to again. The IRS wants to know the total number of miles you drove for your business in a given year. While your commute to and from the office doesn’t count, almost all other business travel does. The best way to have accurate records for the IRS is to keep contemporaneous records—meaning your records are created each day you drive for business or shortly after. While a paper and pencil mileage log works just as well as anything, there are several ways to utilize technology to keep track. Logging the miles on your GPS may provide you with the most accurate record without much maintenance. Apps like Mileage Log+ or Everlance automatically calculate your distances by entering where you’re leaving from and where you’re going. When tax season rolls around, you just export your mileage for the year and hand it over to your account. How easy is that?
- No records? No problem. If you haven’t been keeping a mileage log this year, you’re not completely out of luck. While the IRS frowns upon records constructed after the fact, if you can prove you drove to where you said you drove, you can still deduct your mileage. If you maintain a calendar, appointment book, or planner, you can go back through your records and calculate your mileage based on the appointments you attended. While a firsthand record is recommended and the most accurate, you can still deduct miles driven by calculating them this way. However, it is likely less likely to be accurate when looking back through records and trying to remember where you drove.
- Calculate the actual expense of your vehicle expenses for business. While this method can be tricky, some real estate agents find that keeping track of all vehicle expenses throughout the year gives them a bigger deduction come tax season. This method requires keeping track of gas, oil changes, tires, repairs, insurance, registration fees, licenses, depreciation, and all other vehicle expenses. At the end of the year, you’ll provide your accountant with all these records to determine how much of a deduction you can take for your car.
- Use the Standard Mileage Rate. This method of keeping track of vehicle business expenses is usually the easiest and most effective for a real estate agent. The standard mileage rate generally gives business owners a larger deduction, as long as their car is fairly economical. You still have to track your mileage, but records of other expenses are not quite as critical. Basically, with the Standard Mileage Rate, you are allowed a deduction of 57.5 cents per mile driven in a year. Using this method, you don’t deduct new tires, oil changes, or other expenses—it’s all factored in! If you drove your car 10,000 last year for you real estate agent business, you’re looking at a deduction of $5,750. Cha-ching!
Still have questions about using your car as a real estate agent? Give us a call, we’d love to help you out.
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The Top 10 Tax Deductions for Realtors and Real Estate Agents
What You Can and Cannot Deduct for Advertising Your Real Estate Business
6 Ways to Save Time and Money on Bookkeeping and Accounting as a Realtor or Real Estate Agent
How to Calculate Self-Employment Taxes for Real Estate Professionals and Agents
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