Understanding Vehicle Deductions for Real Estate Agents
As a real estate agent, your car is often your mobile office. You drive to property showings, client meetings, and open houses. But can you write off these car expenses come tax time? The answer is yes, but there are some important details to understand.
What Car Expenses Can Real Estate Agents Deduct?
Real estate agents can deduct various car-related expenses, including:
• Fuel costs
• Maintenance and repairs
• Insurance premiums
• Vehicle registration fees
• Depreciation
• Lease payments (if you lease your vehicle)
It’s crucial to keep detailed records of all these expenses throughout the year to maximize your deductions.
Methods for Calculating Car Deductions
There are two primary methods for calculating car deductions:
Standard Mileage Rate: For 2023, the IRS allows a deduction of 65.5 cents per mile driven for business purposes. This method is simpler but may result in a lower deduction for some agents.
Actual Expense Method: This involves tracking all your car-related expenses and deducting the percentage used for business. While more complex, it can lead to larger deductions for some agents.
Tracking Mileage and Expenses
Regardless of which method you choose, accurate record-keeping is essential. Consider using a mileage tracking app or maintaining a detailed logbook to record:
• Date of each trip
• Starting and ending locations
• Purpose of the trip
• Total miles driven
For the actual expense method, save all receipts related to your vehicle expenses.
Can You Deduct a Car Purchase?
If you buy a new car primarily for your real estate business, you may be able to deduct a portion of the purchase price through depreciation. However, this can be complex, and it’s advisable to consult with a tax professional to ensure you’re following all IRS guidelines.
What About Personal Use?
Remember, you can only deduct the portion of your vehicle expenses that relate to business use. If you use your car for both personal and business purposes, you’ll need to calculate the percentage of business use and apply that to your deductions.
Other Vehicle-Related Deductions for Real Estate Agents
Don’t forget about these additional potential deductions:
• Parking fees and tolls for business trips
• Car washes and detailing (if primarily for business use)
• Vehicle advertising (e.g., car wraps with your real estate branding)