The more you know about how taxes work, the better off you’ll be during tax season. How to file taxes as a real estate agent isn’t the simplest process, however, we have tips that can make it easier. Many real estate agents figured out that being in this industry means that you wear a lot of hats. You are agents above all else, but you find yourself doing marketing and advertising work, or keeping the books in order. With this in mind, it makes sense that come tax season realtors are opening up their 1099 forms and preparing to file their own business taxes. Calculating income tax payments takes preparation and understanding of tax code. However, this can be easier with a little research and the right tax software.
What Is Form 1099?
There are around 20 types of 1099 forms. Various types of income inspire the need for a 1099 form to be filed. Money made off of commodity trading, forgiven debt, changes in capital structure, distributions of capital gains, unemployment benefits, interest income, and more types of income need to be filed with the IRS by tax day. Most Independent Contractors will receive a 1099-MISC from their broker. Any broker that pays their agent more than $600 will file a 1099-MISC for you. Your 1099-MISC will include each individual commission made throughout 2018. If the total of one commission is under $600, then it is not taxable, but you must still include it when it filing your business taxes for the year.
Income Tax Calculations
Some new real estate agents get nervous staring at their 1099-MISC and wondering what to do next, but don’t worry it’s as simple as high school Algebra.
A realtor must calculate the following to complete their taxes:
- 2018 Net income
- Total deductions
- Self Employment Tax
- Personal Exemption
- Tax Credits
- Total Estimate Federal Tax Due
Once those numbers are plucked from your paperwork calculating quarterly income tax payments will be a breeze.
Keeping track of mileage, office expenses, and other purchases that can be deducted is essential for real estate agents. Agents are able to deduct lots of their expenses from their net worth before calculating income tax payments.
These are some essential real estate agent deductions to track throughout the fiscal year:
- Gas, Mileage, & Vehicle Expense
- Marketing & Advertising
- Desk Fees
- Home Office & Supplies
- Meals, Entertainment, & Refreshments
- Software & Business Tools
- Networking & Continued Education
- Insurance, Fees, Memberships
Tracking purchases can be more streamlined than keeping a bag of receipts. There are apps that can track & categorize mileage before actually putting it into an easy-to-read spreadsheet. Some real estate tech lets you store pictures and information about receipts throughout the year to keep data safe and readable. Itemizing your deductions is a necessary step for any real estate agent filing taxes. Moreover, being prepared and keeping track throughout the year can make the process of compiling and reporting deductions easy as pie.
Choosing The Righ Tax Software
With quippy marketing campaigns and ultimate branding, the stress of picking a tax software can sometimes be immense. For someone who is self-employed, choosing the right software can mean saving a hundred or so dollars. We took a look at some of the best breakdowns of real estate tax software to help you figure it out. For the best support, H&R Block is the way to go. It costs around $200 for self-employment with all the fixin’s. This tax software would be the best option for someone looking to pay for a strong support team and savvy interface.
For a more frugal agent, TaxSlayer offers quality tech for a low price. Tax help, a great app, and even Audit Assistance are included in the Self-Employed software which retails around $50. If you want a completely hands-off approach, Bench will handle all of your bookkeeping, and package up your deductions, revenue and expenses for your CPA.
Know You Business Finance
Being a good real estate agent means being flexible in a malleable industry. Part of that challenge is being able to be intelligent when managing business finances. Know about taxable income, understand the tax payments ahead, itemize all deductions, and always take the time to choose the right tax software. This will point any realtor to success when filing your taxes this year.