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The Home Office Deduction for Real Estate Professionals

Posted by Ann Irons, CPA

Apr 1, 2014 9:20:00 PM

real-estate-tax-tipsAs a professional with more than a decade of experience in tax preparation, Bellingham, MA CPA Ann Irons sees firsthand how many people overlook important deductions. Even real estate professionals often fall prey to this trap. Think the IRS will call these errors to your attention? Not likely, says Irons. When it comes to filing your taxes, you’re on your own—unless, that is, you enlist the help of a fellow professional.

The Home Office Deduction: What Is It, and Who Can Claim It?

Real estate professionals often fail to claim a home office deduction. Although not everyone will qualify for this expense,

 those who miss out could be cheating themselves of hundreds of dollar. It is most frequently claimed by brokers and agents who work as independent contractors. Even those who spend a majority of their time actually onsite or on the road may qualify.

When asked why they do not claim this deduction, many real estate professionals cite concerns that doing so will raise red flags at the Internal Revenue Service. The IRS, on the other hand, claims otherwise. Although the home office deduction may have been more uncommon a decade ago, this is no longer the case. Again, this is an excellent example of why it pays to seek professional help with your taxes.

If you have established a home office for the purpose of performing management or administrative tasks for your business, and you have no other available location in which to do so, you may be able to claim this tax deduction. Examples of appropriate administrative and managerial tasks include:

  • Setting appointments
  • Keeping records
  • Paying your business-related bills
  • Reviewing publications about real estate
  • Completing continuing education related to real estate
  • Maintenance of contact and client lists

Remember, says Irons, that you can only claim this deduction if you do not have a fixed location from which you can perform these activities. If you have a desk at a brokerage office, for example, you cannot claim it.

What Does It Mean For Your Rent?

Here’s an interesting note about claiming the home office deduction. If you qualify, it enables you to deduct some of your rent. The specific amount will depend in part on how much of your home is used exclusively for office work. For real estate professionals who own their home, you can deduct this percentage of property tax payments and interest paid on your mortgage. Ann notes that if you claim this as a business deduction instead of as a personal deduction, you will reduce your income taxes and the amount of business income that is subject to self-employment taxes.

Questions about claiming deductions as a real estate professional? To learn more about filing income taxes, or to request an appointment with Ann Irons, CPA, LLC, contact our Bellingham, MA tax preparer’s office at 508-966-0700. We welcome clients from in and around Bellingham.

Topics: Individual Income Taxes

About Ann M. Irons, CPA LLC

ann_irons_head_shotAnn spent over 25 years in the financial service industry, gaining knowledge and experience that allows her to provide an array of tax, bookkeeping, and accounting services for her clients. Relying on a stringent code of ethics and a dedication to maintaining the highest industry standards, Ann works hard to ensure her clients receive the quality service they’ve come to expect. A member of AICPA and MSCPA, Ann has also had an article featured in the renowned publication, Banker and Tradesman. 

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