Self-Employed? Realtor? 10 Last Minute Deductions

December 31st is a time to celebrate the end of a successful year in your real estate business.But, it’s also the last day for most real estate agents’ tax year. Now is the time to estimate your 2017 income taxes to see if you need additional deductions to save money. Before getting into tax deductions, never lie in your tax returns as they carry severe penalties.

Here are 10 last-minute tax deductions especially for real estate agents in 2017:

1. Create an SEP (Simplified Employee Pension)

Keller Williams Realty recommends its members create an SEP retirement plan before the tax year ends as an excellent tax savings strategy for self-employed real estate agents.  

According to Investopedia, an SEP is a self-employed IRA where the maximum tax deduction for 2017 into an SEP is 25% of the self-employed annual compensation up to $54,000. This means if you contribute $10,000, you will save $2,500 in taxes. If you contribute the full $54,000, your tax savings will be $13,500.   

In addition, you could be eligible for a tax credit up to $500 annually for the first three years your SEP account is open.

Before creating your SEP, consult with a tax attorney or a CPA to learn everything you need to know about this deduction.

2. Buy or Lease a New Car

Appearances really matter in our industry. Buying or leasing a new car before the end of the year allows you to take advantage of the discounts car dealers offer on 2017 models after the 2018 ones arrive, according to Autotrader.  

Surprisingly, while you can only deduct the depreciation of a newly purchased car, you can deduct the entire monthly payment when you lease a car if it is used solely for business purposes, according to TurboTax. Otherwise, the percentage of business use is deducted from the lease payments if partially used for personal purposes.

However, the upfront down payment on leasing your car is deducted over the life of the lease, according to IRS Publication 463.

3. Client Christmas Gifts

Send out up to $25 in Christmas gifts to all your clients and prospects so you can deduct them from your taxes. According to the American Institute of Certified Public Accounts, the IRS allows your business to deduct up to $25 for gifts to business clients and prospects per recipient each year. There is no limit on how many business gifts you make. However, you must keep records of the gift, amount, and business relationship.   

4. Home Office Deductions

According to Forbes, a dedicated workspace in your home used only for your real estate business qualifies for a home office deduction. Surprisingly, of the 26 million Americans having a home office, only 3.4 million taxpayers claim the home office deduction.  

Forbes also claims that home office deductions no longer trigger a tax audit from the IRS. This claim is supported by J.K. Lasser’s Your Income Tax.

The IRS recently published an excellent explanation of the Home Office Deduction. Homeowners and renters can use this deduction.

In 2013, the IRS published a simple option for computing the home office deduction. This simple method reduced the burdensome record keeping under the regular method by allowing a prescribed rate based on the square footage of the office in relation to the home expenses such as rent, mortgage, gas, electricity, etc.

According to NAR, even if your broker provides you with an office, your home office expenses can still be deducted.

5. Buy Office Supplies and Equipment

Aside from your home office deduction, you can purchase extra office supplies like pens, paper, stationary, etc. Landline telephones for business can also be deducted.

Your smart phone (or cellular) costs can be deducted based on the percentage of business use.

NAR also claims that your office equipment such as furniture, copiers, computers, fax machines, etc. can be “expensed in full or depreciated over a number of years”.

6. Buy Real Estate Software and Apps

Make a Christmas present to yourself by upgrading all of your real estate software and apps and deduct them. You need to keep pace with your competition by investing in better open house software, the latest in transaction management software, upgrade your CMA software, invest in new landing pages, website design and features, upgrade your blog’s interaction tracking software, etc.

Subscription services like Customer Relationship Management (CRM) software are also fully deductible.

7. Increase Advertising and Marketing

If you need additional deductions, put more money into your advertising and marketing efforts as they are tax deductible. Top producers spend a lot of money in this area because it pays off in the end.

Buy postcards, virtual staging apps, and try out different advertising vehicles. Besides being tax deductible, they can lead to increased commissions.

8. Book Conferences and Conventions

If you still need more tax deductions, arrange your travel to attend industry conferences and conventions like Inman Connect and the NAR Conference. Your travel and lodging expenses are fully deductible. Keep records of your meals while away on business to qualify for the 50% deductions.

Treat yourself by attending business events in exotic places or warmer climates, which are tax deductible. This includes industry development courses, trade shows, and real estate trends coaching.

Pay for all of these business events before December 31st to deduct the expenses in your 2017 tax return. Or, wait until 2018 starts if you want the deductions for the 2018 tax year.

9. Uber and Taxi Fares

If you live in a congested urban area, consider using taxis and Uber to attend business-related meetings and events. This will save you from paying gas and increased maintenance on your car while deducting all of these fares. It also relieves you from the stress of driving in congested traffic and finding parking spaces. You can relax and make phone calls, answer emails, and chat with clients while you commute.

10. Hire a Virtual Assistant

You probably spend too much time doing research, clerical chores, prospecting for seller and buyer leads, and setting up listing appointments.

What if you could hire a virtual assistant to do all of that “grunt work” for you at a very low cost? Wouldn’t you rather have free time to do things that are going to make you money, like going to listing appointments?

Hiring an overseas virtual assistant won’t cost you nearly as much as hiring someone in the U.S. The IRS, U.S. Labor Dept., and U.S. Immigration all say it is legal for U.S. employers to hire people living outside the U.S. as virtual assistants.

The Pricelessness of Durango's Pricey Real Estate Market

As a real estate agent in the paradise called Durango, Colorado it is only folks from California that feel like they got a great value when they bought a home. IF you are from almost anywhere else, Durango's housing prices are a tough pill to swallow. Yet it still comes down to the old adage of Location, location location.

We like to focus on what is priceless about Durango to help you get past the Closing table. What do we mean when we say the pricelessness of Durango.....its 320 days of sun, Clean air and blue skies. Tons of open space. Being surrounded by nature. Epic trails. Abundant wildlife. Great people. Great food. A real town.

Over the years you see people come and go. And come back again. I can't tell you how many people left to go get 'a real job' or had to go be in the 'real world' only to return and complain that the home prices went up. Hey, we told you not to go in the first place!

You see, Durango is just like your most comfy shirt or tattered undergarments, which may attest to why we were named 'Worst Dressed City in the Nation' way back in the day. It just feels good. Heck, people work 2 and 3 jobs (the Durango shuffle) just to make ends meet - and mostly they are happy about it.

Out in the real world, the trail head is an hour away in moderate traffic and crowded when you get there. In Durango, the trail is out the back door and Trails 2000 hit 2,000 miles of trail in 1999.  We are just blessed to be nestled into a gorgeous river valley and surrounded by millions of acres of public lands. Unlike my native New England, there are no toll booths and rarely any park entrance fees. Have at it.

Unlike the real world, inclement weather rolls in and our people don't roll up shop. Well, actually they do - a few inches of pure, light Colorado pow-pow drops and employees disappear faster than donuts at the police station. But we don,t cry about the weather, we just break out the appropriate toys and get after it.

In general, big budgets need not apply. Aside from our home prices, many things are quite affordable or free. There is always something going on and often its attainable for the mortal Durangoan. You can just go to our delightful downtown, park it on a bench and get some quality people watching in - from cowboys to rope-heads, from conservative to hippie....there are usually some good sights to enjoy along with good eats in our stellar restaurants.

All that said, you'll likely have to find value in the pricelessness of Durango, because I know your gonna sass me about what your paying for a home. Just be thankful you worked with us, we get people 2-3 % more on average than the average Realtor - and thats priceless. Ness.

New Business' in Durango's Downtown

As many of you know, the Durango City Council has seen fit to appoint me to the Business Improvement District (BID) Board. We were originally charged with trying to get a Convention Center into downtown Durango (an idea that is currently being brought back to life) and morphed into being an advocate of Durango's biggest asset - its downtown businesses! The BID does a lot of marketing for both Downtown and Uptown (N. Main) Durango as well as promote many of Durango's most coveted events.

One thing that is always exciting is to watch new businesses open in the District. Some new ones include:

11th Street Station. 1101 Main Ave. We are excited for this new concept for downtown Durango - maybe aa little taste of the best of Austin, Texas - food trucks! Centered around a hip new bar and anchored by a handful of food trucks this is exciting. Flavors allegedly included Indonesian, sushi, sliders and soups, wood-fired Pizza and tacos. The Wisner's, Marcos and Jaime, have a cool looking place coming later this month.

Animas Chocolate Factory - 920 Main Ave. IF you haven't been to their old location on North Main then head down to the new digs. Marc and Carly have expanded again and now live downtown where we would expect them to thrive yet again. Word on the street is that they are open. You can sample the good while watching the chocolate making processes before your eyes. Yum. We've gotten their amazing hot chocolate for client parties in the past. Try it.

Fired-Up has moved next door and completed their rooftop patio. Downtown and Uptown Durango, in my humble opinion, should be littered with rooftop restaurant bars and restaurants. How better to soak up the amazing views that surround our little paradise than on the roof of your favorite eatery?! These guys are opening up a new Taco Restaurant in the old space next door - sure to be as tasty as the uber-popular Fired Up

Have you heard about the new Pop Sushi? This is out by Bread where Bent and then Plate were located. This place is being opended by the folks from Rice Monkeys. Asian Tapas. Sounds amazing! Not sure what Izakaya-inspired means but happy to go learn. This one isn't in the BIF but we wanted to give them a shout out anyway.

Tim and Becky from Zia are at it again....they are building a new location across the street from their current digs Uptown. The new building will feature a rooftop bar (yes!) and will be called Zia Cantina. Super excited for this new Uptown offereing. The new Rock Lounge (climbing gym - formerly my own Animas City Rock we opened in the late 90's) will open across the street too.

NEw doughnuts at the old 5th Street Eatery. Macho's is opening an upscale Mexican Restaurant at the old Lost Dog location. Super excited for some new new in Durango eats!!!

Search Durango area Real Estate with The Sebastian Group here.

- Author Sebastian Hartley is a BID Board Member, top-area Realtor and investor at Keller Williams Realty at 700 Main Avenue. He is a business coach and huge Durango advocate. Text KWDurango to 87778 to download his Free Mobile Real Estate app to your smartphone.

Actually, NOW is the time to list your Durango area property!

Fall is upon us, and with it the end of the high season for real estate.  However, if you're thinking you've missed your chance to sell your home, let me reassure you. This autumn actually presents a fantastic moment to sell. Here's why:

First off, housing inventory is still incredibly low.  In fact, according to data from the Census Bureau and the National Association of Realtors, inventory remains well below historic averages, and is 50% less than the peak in 2006.  In addition, the recent slump in new construction means demand for existing homes will stay high in the near future.

Second, while mortgage rates also remain very low, recent announcements by the Federal Reserve might cause them to finally start rising. This would make mortgages less affordable and might turn away a significant number of potential buyers. This is even more of a concern when you consider the continuing growth of home prices—6.9% in the last year alone.

Third, contrary to conventional wisdom, fall is generally a great time to list your home.  Buyers in the fall are likely to be more serious because they have probably been searching for months without success.  Also, because fewer homes are listed in the fall, this means there's even less competition than we’ve seen due to the general low inventory.  So what do you get when you put all those things together?  Well, if you were to list your home now, chances are good that you would be able to sell it very easily and for a top price. On the other hand, if you decide to wait, the situation might not be as favorable because mortgage rates might rise or because new construction might pick up. That means the time to list your home is now.

Click here to search the Durango area or for a value on your home.