Overlooked Tax Deductions & Tax Strategies - Save Big Time
In this fast‑paced workshop, Samantha and Lynn from Inside Tax walk real‑estate agents through a series of practical tax‑saving tactics. They begin by stressing the basics: set up a dedicated business bank account and consistently track all expenses using tools like QuickBooks or spreadsheets. They then detail often‑missed deduction categories—advertising and marketing (including client‑gift expenses and even professional attire), mileage and travel (with app recommendations such as MileIQ and TaxBot and the need for documented business purpose), cell‑phone and home‑internet costs, home‑office square‑footage calculations, and meals/entertainment when tied to client outreach. The presenters shift to entity‑structure advice, explaining how an LLC’s pass‑through income can trigger high self‑employment taxes, and how electing S‑corp status (or having an LLC taxed as an S‑corp) allows agents to pay themselves a reasonable wage (about 40 % of net profit) and avoid a large portion of the 15.3 % self‑employment tax, saving several thousand dollars. Finally, they unveil the “corporate rent” strategy: the agent’s LLC rents the agent’s primary residence for up to 14 days a year for business meetings, creating a deductible expense (approximately $15,000 annually) without reporting the rent as personal income, provided proper contracts and bank‑transfer documentation are maintained. Throughout, they encourage agents to ask whether each dollar spent is business‑related, keep meticulous records, and reach out via email for templates and further guidance.
Chapters
Thank you.
So, thank you for the introduction. I'm Samantha and this is Lynn. We are from Inside Tax and we're excited to be here today. We're gonna go through things kind of fast so that we can get done in our timeframe that we were given, but I'm really excited because we are here to help you save thousands in taxes. So I promise if you listen to the strategies that we're gonna share, you can easily walk away from this meeting knowing how to save $3,000 to $6,000 on your taxes. So nobody likes paying taxes, so we're here to help show you how So we're really excited. So we'll go ahead and just jump right in. So as a real estate professional, it's really exciting. You guys have awesome opportunities to take more tax deductions than a lot of other businesses can. And I want to go through those briefly real quick. And by the way, if we aren't able to answer your questions while we're here, if you aren't able to catch us afterwards, go ahead and email us and we'll get your questions answered. So first thing, sales commissions. Set up a business bank account if you haven't already. That's really important. And then track your expenses. That's another one I know that's no fun to hear. Whether you use QuickBooks or you use an Excel document, just some way to keep track of your expenses throughout the year. If you email us, we can send you a spreadsheet that we've compiled that has a list of recommended categories of expenses that you look for to take. So I want to go over real quick the— A lot of missed expenses that you guys are able to take. So the first one, which I think is the most exciting for real estate agents, is advertising and marketing. So there's a lot that can go into this category that you may have not previously realized. So you, when you go out and you're meeting with a client, you are advertising yourself and how you look. So it's important that you look the part. So your clothes that you, that you go out and show homes in, that should be under advertising and marketing. Client gifts is another one. When you are giving a gift to a client and they have just closed on a home, what are you really hoping that they're going to do? You're hoping that they're going to go tell all their friends and neighbors and say, hey, this agent is amazing, use this agent next time you buy or sell a home. So that is really an advertising expense under there. And then let's see, mileage is the next one that's really important. You guys do a ton of driving, you guys know that. Keep track of your miles. This is a huge, huge deduction that I've seen take off like thousands and thousands of dollars on your taxes.
Is miles the same for a motorcycle?
Yeah.
Is it in kilometers or mileage, Jeff?
Yeah.
Am I on back, Jeff?
Yeah. So you're driving, as long as it's work-related, keep track of those miles because those will definitely help lower your taxable income a lot.
Can I just say something about that?
Yes.
Everywhere you drive, you look at real estate. So MileIQ on your cell phone, best thing ever.
TaxBot.
TaxBot, there you go. Like, just get one of those that tracks your GPS.
You've got TaxBot.
You don't have to have a broken-down car. TaxBot.
Miles to this place. You said the app is a robot?
These apps, every like 6 miles you drive, you go somewhere, you stop and it breaks it down. It says it's just a personal driver.
Okay, so auto is a big one. Keep track of your mileage. It racks up. Another one is travel. This is exciting. This is an exciting one. So let's say you're taking a trip down to Vegas. How can we make this a business expense? Maybe you're taking your family with you. The key thing when you go on a travel— when you travel, when you go on a trip or whatever, the IRS wants to know what you're doing. So if you're going down to Vegas, how can we make this a business expense? Well, are you going to check out the market down there? Are you meeting with other agents down there? Maybe you have a client down there. So when you— before you go on a trip, think about how you can incorporate a business purpose into that trip. Because if you can come up with a business purpose, now your mileage, your hotel or airfare, your meals and entertainment, that becomes a tax write-off.
A tax deduction. A tax deduction. Even if you have your family.
Yeah. So Hawaii, all that same deal. Yep. Document a business purpose.
For your open house.
Yeah, corporate retreat in Hawaii. Sorry. I was told you had to have some kind of legal background from there.
No? Business background from the open house.
Yeah. Document on your travel document, okay, where were you going? What was your business purpose? Who were you meeting with? Those kinds of things. Because a couple months down the road you're not going to remember that. So make sure you write down those things on your receipts and stuff like that and keep your receipts. And it's obviously just for your expense, not like all your kids and stuff. Okay.
Oh, you can't write off your kids?
If you're definitely doing business for them? If there's a business purpose, yeah. Oh, you can? Yeah.
So what you do is you take a family picture and you put that on a postcard that you send to your clients and boom, they were models in your advertising.
Yeah. Okay, so A couple other ones that you may not have thought of, your cell phone and your home internet. You could not do your job without your cell phone or without your home internet, so that needs to be a business deduction coming out of your business account and it needs to be on your tax return.
The whole bill? Yes.
Yes, because otherwise I wouldn't have internet at home.
Now you've got to figure your square footage out for your office. That's a home office setup. Just take your bill and put it to your business.
Yeah. And then let's see here. So those are kind of the big ones. So a couple things for you guys as real estate agents. Hold on a sec.
Okay.
I just want to mention our business philosophy is ask yourself if you are spending a dollar at all, if you are spending a dollar, is that related to your business? If it is related to your business and your business activities, take that out of your business, spend it out of your business account, and take the tax write-off. So a lot of these things that we've mentioned, there's a business purpose there. These are legitimate business expenses. Take that out of your business account, These will help lower your taxable income. The less taxes you're going to pay. You guys have an amazing opportunity where you're in the real estate industry. There's a lot of extra things that you can do, and these are kind of the big categories that we've touched on for sure. So start thinking about that as you swipe your cards. Okay, is this a business expense? Can this be a business expense? Another one, meals and entertainment. When you go to Costa Vida or wherever, whether you're wearing a name tag and that, if you start talking to your waiter Hey, are you looking to buy a home? You know, anybody could be a potential client, and you're advertising yourself. So meals and entertainment, that's another one. You guys are out on the road a lot, whether you're taking clients out or not, another big one for sure. So track your business expenses, have a separate business bank account, and if you're spending a dollar, is it related to your business? Okay.
Okay, so a couple— one thing for sure that Samantha said that's That's key. Business purpose. As long as you have a business purpose, the things you're trying to do, that's what the IRS wants to know. What's the business purpose? The only 2 things you can never write off would be your mortgage payment or rent payment and your personal groceries. But everything else, there's probably a business purpose somehow that we can do that. So I want to talk a little bit about entity structure. Who here has a business for their real estate to do? LLC set up? Anybody have an S corp set up?
C corp.
Perfect. Okay. So the most important thing is So what happens is that you have income that's coming in, the IRS looks at it. Let's say I make $100,000 in a year.
Excuse me.
I'm going to use some of those expenses that Samantha talked about to reduce that amount. So I'm going to— let's say I get $50,000 in expenses. The $50,000, if I have an LLC that's going to flow through to my personal return, I'm still going to pay 5% state tax, pay somewhere between 15% and 35% federal tax, and then 15% 15.3% in self-employment tax. Now, that's almost over 50% of taxes that you're paying to the government that we don't want to pay, right? We want to pay our fair share, but we don't want to pay any more. So what happens if, if I take this $50,000 here and I get that self-employment tax, which happens if you have an LLC or if you just— it goes to your personal Social Security number when you do your taxes. I'm going to pay $7,750. $1,650 in self-employment tax on that $50,000. The way we get rid of that is we set up an S corp. So all these people that have S corps, what happens is I create— and even if I have an LLC, I can actually send a document to the IRS that says, I have an LLC, I want to be taxed as an S corporation, which we can do, we can help you do that. So now I have an S corp set up over here. The reason I can get rid of the self-employment tax is the requirement by the IRS is that I have to pay myself a reasonable wage. So what's a reasonable wage? For real estate agents, we used to have it lower, but we found for real estate agents about 40% of your net. So 40% of that $50,000 net that I have, which is $20,000, is what I'm going to pay myself as a W-2 wage throughout the year. Okay? The 15.3%, I get rid of that over here. It's gone in the S corp. Because I'm paying self-employment tax in my wage to myself. So now I'm paying about $3,000 in this wage itself. It's payroll tax essentially, so it's your Social Security and Medicare that you're paying, that you have to pay. So now I've saved myself $4,600 in taxes that I've been paying here that I don't have to pay because I have an S corp set up.
Okay.
So if you have an LLC, that's awesome. It's always better to have protection, to have an LLC, but an even better option And once you have your LLC set up, is to go ahead and set up the S corp.
Okay?
Go ahead.
Okay. All right, the last strategy that we want to share is awesome. If you didn't get anything out of what we just said, this is what you want to pay attention to. This is magic. This is awesome. So there's 2 parts to this. Big businesses, you've heard they go to a hotel, they rent out, you know, their conference room and stuff like that. They have the audiovisual, blah, blah, blah. You know, they have all that. Big businesses do that. Okay, so keep that in mind. The other part to keep in mind is, you may be familiar with this, where you're agents. The IRS has a rule that says if you rent out your home or your asset for more than 14 days, you have to pick up that money as income. But what a lot of people miss is 14 days or under, you don't have to pick that up as income. Okay, so with these 2 strategies, how do we mesh them together? So what we say, it's called— the strategy is called corporate rent. So your business, your LLC, and you have to have a separate business bank account to do this. Your business, and it doesn't matter if you're the only shareholder, your business is going to contract with you to rent out your home for corporate business meetings. Okay, so once a month or 14 times or less during a year, your business is going to Rent out your home for a business meeting. Okay? And so we have the documentation. If you email us, we can give you a packet that has, you know, the contract that you need to sign between you and your business. But what does this do? So what this does is each meeting, we've priced it out. If I was to go to a hotel and have this business meeting, it would cost me $1,250. Okay?
Per meeting.
So this is fun. If you have these business meetings, if you do corporate rent, what this does is this creates a $15,000 tax deduction for you and your business that you then do not have to pick up as income on your personal return. So you just gave yourself a $15,000 tax-free bonus.
Woohoo! Woohoo!
Which is awesome! So we have the email list, and we can give you the documentation that you need to make this audit-proof. It has gone through an audit. And it has worked. So this is legitimate, but it's amazing. I— this is— it can easily save you between $4,000 and $6,000 in taxes.
You mean for 14 days you can do this?
Up to 14 days. Up to 14 days. You can go to— if you do 15, now all this is counted as income. You don't want that. 14 days or less.
Okay, wait, what's considered a day? One meeting in your office?
One meeting, one day. Don't do it twice in a day.
Jim's here. Is that allowed on more than one property or just your primary residence? Like say you have 5 rental properties, can you do that?
No, because if you're renting out your property, then you're already over the 15 days. This is your primary residence, given you're not renting it out for Airbnb and stuff like that. So you can essentially write off your mortgage is what you're trying to say.
Basically, yeah.
You can't write off your mortgage, but if you're staying at your home with business meetings there, you're not working anyway. It's a $15,000 tax deduction to rent your business to Well, how do you prove that? Email us and we can give you the documentation.
Now, Jim, you'll also want to set up your business bank account on automatic payment out on the same day every month for documentation. So if you're audited, you've got that paper trail. I've been doing this for 7 years. It's awesome. These guys are awesome.
So you just do it once a month?
Yep. Automatic payment.
And then there are the ends you can do an extra 2 transfers to get up to that. If the IRS, if they came to look at this, what they're going to be looking for is the transfer from your business bank account into your personal, and then they're going to want to see the contract with your business and you and any business meeting minutes. But like I said, email us and we can give you the forms that you need.
And yes, you can have a business meeting by yourself. Plan, budget, strategize, set goals. I've been using these guys for 7, 8 years. They are wonderful. That's one strategy More than it pays for the cost of doing all my taxes. Geez, it's so hard to do.
