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What expenses can I claim on my income taxes if I am a part time real estate agent and have a primary job.?


I received my license in July and did not sell or buy a home this year. I did however spend money in marketing, office space, computer equipment, transportation, etc. How much of these expenses can I claim?

You can claim any direct or indirect expense you have incurred working the real estate business. The only indirect expense you can't take would be a portion of your home telephone. The phone has to be all business to write off the cost. The home computer can be deducted if you use it more than 50% for business.
When you say office space I asume the realtor is charging you for space in the office, if so that is deductible. If you are talking about a home office I would suggest that you consider writing this off carefully. The home office wold have to be used exclusively for business, if not no write-off. The home office generally only gets you a small percentage of the cost of the house (not land), some utilities and a few other small items. In my experience it isn't worth the effort and tax savings.
The reason for this is that you have now made a portion of the house a business property not a personal residence. If you sell the house there is an exclusion from income for the first$250,000 of gain. This exclusion does not apply to the business portion. You would pay tax on te sale of the business portion. If your gain would be higher than the exclusion amount go for it, the only draw back is that any taxable gain equal to the depreciation taken is subject to a 25% tax rate rather than 15%.

You can claim all direct expenses related to your part time job.

If you claim home office costs, it's a red flag to the IRS, so stay away from that.

If you claim a vehicle, you need contemporaneous records to prove % used for business - same for computer - probably not 100%.

IRS understands you might not make income in your first year, but expects at least 1 of 4 years to have a profit.

Any of it as long as you have some sort of proof that the amount you're deducting is related to the business and nothing else.

E.g. You put 20,000 miles on your car during 2006. If 2,000 of those miles were related to real estate, you can deduct 10% of your auto expenses.

For office space, if you're talking about a home office, it must be used EXCLUSIVELY for your business. This is important - when the IRS sees a home office deduction on a return, it's kind of a "red flag" for audits, so be careful.

Best advice, if it's questionable, DON'T deduct it.

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