What records should real estate agents keep for tax purposes?
Real estate agents have specific recordkeeping needs because of how the business works. You’re likely self-employed, which means the IRS expects you to document both income and expenses thoroughly. Missing records mean missed deductions or potential problems during an audit.
Start with income documentation. Keep every commission statement and closing document from your brokerage. You’ll receive 1099-NEC forms showing your income, but your own records should reconcile with what gets reported. Also keep documentation for any referral fees you receive or pay to other agents.
Vehicle mileage is typically one of the biggest deductions for real estate professionals. Track every business mile including drives to showings, open houses, client meetings, property inspections, and errands for closings. Use a mileage tracking app or keep a detailed log with date, destination, purpose, and miles driven. The IRS requires contemporaneous records, meaning you need to track as you go rather than reconstruct at year end. Guessing at mileage in April doesn’t hold up if you’re audited.
Marketing expenses add up quickly and are fully deductible. Save receipts for business cards, yard signs, flyers, digital advertising, social media promotion, listing photography, virtual tours, and website costs. Agents who don’t track these throughout the year often forget half their marketing spend by tax time.
Client development expenses require specific documentation. Meals with clients are 50% deductible, but you need receipts showing the amount, date, and location. Note who you met with and the business purpose. Client gifts are deductible up to $25 per person per year. Open house expenses like refreshments and promotional materials count as marketing.
Keep records of real estate license renewal fees, continuing education courses, association dues, MLS fees, and lockbox fees. These are legitimate business expenses that many agents forget to deduct.
Technology and equipment documentation matters too. Track purchases of computers, tablets, phones used for business, cameras, and software subscriptions. If something is used partially for personal purposes, only the business portion is deductible, so note the percentage.
If you claim a home office deduction, document the square footage of your dedicated office space and your home’s total square footage. Keep records of mortgage interest or rent, utilities, insurance, and repairs. The space must be used regularly and exclusively for business to qualify.
Don’t forget E&O insurance premiums, professional liability coverage, and any accounting or legal fees related to your business. These are deductible operating expenses.
The key is capturing these records throughout the year. Small business bookkeeping works best when you reconcile expenses monthly instead of scrambling in March. Consistent tracking means you don’t leave deductions on the table and your tax preparation is straightforward rather than stressful.
The Treasure Valley's Tax and Accounting Team
The Next Step:
A Short Conversation
Tell us what you're dealing with. We'll listen, answer your questions, and give you a straightforward quote.
More Questions
How do I track raw materials and finished goods inventory?
Set up separate inventory accounts for raw materials and finished goods in your chart of accounts. Track the flow of costs from material purchase through production and into finished inventory using bills of materials that define what goes into each product.
Read answerWhich QuickBooks version is best for small businesses?
QuickBooks Online Plus works for most small businesses because it includes job tracking and inventory. The right choice depends on what you need to track, not just what costs less.
Read answerShould I elect S-corp status for my real estate business?
It depends on how much you're earning and what type of real estate work you do. S-corp election typically makes sense for agents and brokers with net profits above $40,000 to $50,000, but rental income usually doesn't benefit from the structure.
Read answerCan I deduct food waste as a business expense?
Food waste is deductible, but not as a separate line item. It's captured through your cost of goods sold calculation. When you throw out spoiled inventory, that cost is already reducing your taxable income.
Read answerCan a contractor use cash basis accounting?
Yes, most contractors can. The IRS allows cash basis accounting for businesses with average annual gross receipts under $29 million. The bigger question is whether cash basis gives you useful financial information for running your business.
Read answerHow do quarterly estimated taxes work for small businesses?
Small businesses without payroll withholding pay income taxes in four installments throughout the year. Due dates are April 15, June 15, September 15, and January 15 of the following year. Missing payments or underpaying results in penalties that add up each quarter.
Read answer
