Realtors (and everyone, really) are always interested in maximizing their deductions for taxes. 2018 is over, but here’s four things you can still do to lower your tax bill.
1. Find
If you haven’t gathered all of your business receipts and records for 2018, find them. Your first job is to organize all the money you’ve already spent. Your real estate business expenses are what qualify you for deductions, so get the most bang for the bucks you spent last year. Here is a common list of deductions that apply specifically to realtors.
2. Ask
If you have a business expense that isn’t in the list of deductions don’t assume it just isn’t deductible. As long as it is not listed specifically in the tax law as non-deductible, then it’s worth asking if this expense is “ordinary and necessary” for your real estate business.
For example, a new expense like Facebook ads is still deductible as advertising expenses even though it isn’t explicitly listed in the tax code. Facts and circumstances determine whether the expense is ordinary and necessary to your business, so ask your tax advisor if it is deductible.
3. Consider
Consider making a retirement plan contribution to lower your taxes. You can deduct this payment against 2018 taxes even though the contribution will be made in 2019. This is committed money, though, meaning that it’s really expensive to get it back before you reach a certain age. Make this decision in the context of your entire financial picture, not just considering taxes.
4. Meet QBID
Hi, I’m QBID, the new kid on the block for 2018. You probably don’t know much about me yet. QBID is an acronym for “Qualified Business Income Deduction.” Congress created me in December 2017 and your 2018 tax return is the first time I’ll be in effect. I’m a 20% deduction against business income (which is something you have if you’re a realtor).
I’m so new I can’t describe everything about me in this blog post. But I don’t want you to miss out on my benefit, so make sure your tax preparer knows about me. Here is where I live on your Form 1040. If there is a zero in this box on your 2018 1040 you either didn’t make any money (🙁) or your tax return may be wrong.
Here’s an article on NAR about me. Pretty sure we’ll be BFFs for as long as I’m around.
Looking forward
We are happy to provide this information for 2018, and sincerely hope it helps decrease the numbers on your tax bill. At the same time, our mission at Advisage RVA is to help complete and advise on the above list during the year instead of waiting until it’s over and then looking backwards. (It’s more fun, and safer, to be able to see where you’re going while you’re in motion!)
Next February you should be focused on selling houses, not scrambling to get your previous year results to your CPA. This is achievable using cloud accounting, our method of choice for bookkeeping. We accelerate the entire process of storing and organizing business expense receipts so that you’ll have accurate information to make the best tax moves at year end. Pretty cool, huh?