How do I separate personal and business expenses as a realtor?
The foundational step is opening a dedicated business bank account and credit card. Every commission gets deposited to the business account. Every business expense gets paid from the business card. This creates a clear paper trail without any sorting required. If a transaction is on your business card, it’s business. If it’s on your personal card, it’s personal.
The tricky part for realtors is mixed-use expenses. Your car takes you to showings and also to the grocery store. Your phone handles client calls and personal texts. Your home might include office space. These need systems to track the business portion accurately.
Vehicle expenses matter most for real estate agents. Track every business mile using an app or a simple log. Trips to showings, inspections, open houses, the title company, and client meetings all count. Personal errands don’t. At year end, you can use the standard mileage rate or actual expenses, whichever saves more. Without a mileage log, you lose this deduction entirely if audited.
Marketing is straightforward when paid from your business account. Photography, staging, signage, postcards, online ads, your website. These are clearly business. If you occasionally pay from a personal card, record it as a business expense with an owner contribution on the other side. Proper real estate bookkeeping keeps these categorized correctly so nothing gets missed at tax time.
Client entertainment and meals require documentation beyond just the receipt. Note who you met with and the business purpose. Coffee with a potential seller discussing their listing strategy is business. Dinner with friends who happen to own a house is not.
MLS fees, lockbox rentals, association dues, E&O insurance, continuing education, and licensing renewals are all business expenses. Pay from your business account and categorize properly.
Home office works only if you have a dedicated space used exclusively for business. A room where you do paperwork and nothing else qualifies. A kitchen table where you sometimes answer emails does not. The simplified method gives you $5 per square foot up to 300 square feet.
Phone and internet can be partially deducted based on business use percentage. Estimate the split honestly and stick with it consistently. If you’re audited, you need to be able to explain your calculation.
The real solution is discipline. Pick a day each week to review transactions and categorize them. Waiting until April to sort through twelve months of mixed expenses is how realtors lose deductions and end up overpaying on taxes. A small business accountant in the San Gabriel Valley can help you set up the right systems and keep your books organized throughout the year.
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