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- March 7, 2025
Accounting for Real Estate Agency Expenses: What You Can and Cannot Deduct
Real Estate agencies get multiple tax deductions from the IRS. So, as a real estate agent, you have a lot of options to bring down your taxes. But, there are some limitations to these deductions. On top of that, there are certain things that you cannot deduct.
So, before you get ready to file your income tax return in 2025, we decided to give you a bit of a quick overview of what you can deduct and what you can’t. So let’s get started.
What Real Estate Agencies Can Deduct in 2025?
Advertising and Marketing
If you are spending money on advertising and marketing for your business, you can claim a deduction on it. For 2025, you can deduct 100% of these expenses. It could be anything like print media, flyers, brochures, social media, or digital media marketing. As almost every real estate agent spends money on digital marketing, it could be a great way to save some money on taxes.
Vehicle and Travel Expenses
As of 2025, you real estate agencies can deduct 70 cents per mile for their vehicle usage. However, the only requirement is that this expense has to be specifically for the business. 67 cents is a rise as compared to what was allowed in 2024. IRS raised this limit due to rising inflation and operational costs. On top of that, you can deduct expenses like fuel and insurance for the vehicle you use for business. But again, this usage has to be specifically for your business. You’ll also have to keep accurate mileage logs or receipts to prove your deduction claims if asked.
If you are traveling to meet out-of-town clients or going on business-trips, you can claim deductions on those expenses too. This includes airfare, accommodation, and 50% of meal costs.
Office Expenses
If real estate agents are renting office space, then their rental payment is fully deductible. On top of that, you can also claim deductions on internet, phone services, electricity, and other utility bills.
But what about those who are working from home? Well, there is an option for a home office deduction for them! In 2025, this deduction is set at $5 per square foot. The top limit of the area is 300 square feet. So, the top limit of home office deduction for work-from-home agents is $1500 per year. The only prerequisite is, that a particular space of the home has to be used exclusively for business activities.
Commissions Paid
Sometimes, real estate agencies pay commissions to other agents, or they pay referral fees to existing clients. These payments are deductible. There is no cap on how much deduction you can claim in this regard. Reason? Well, the IRS considers these expenses as a part of the cost of doing business. So make sure you claim this one if you are paying commissions or referrals.
Professional Services and Fees
If you are hiring any legal advisor, consultant, or even an accountant, you can claim deductions on their fees. Again, the IRS considers these fees as the cost of doing business and hence the deductions.
Licensing and Membership Fees
Real estate agencies are often active members of multiple organizations or groups. For example, NAR (National Association of Realtors) or other industry groups. While these memberships are paid, they can claim tax deductions on these membership fees.
If you want to renew your real estate license, then that expense, too, is deductible. While not a big deduction, it can surely give you some respite.
Insurance Premiums
Real estate businesses have to take multiple insurances. For example, they take general liability insurance, errors and omissions (E&O) insurance, and even workers’ compensation insurance. As a real estate business, you can claim deductions on all the premiums of these insurances. In fact, you can claim deductions on your own and your employee’s health insurance, too. But there are certain technicalities to these deductions. Only real estate tax deduction experts like CROWNGLOBE can help you get the benefit of these deductions.
Education and Training
Continuing education expenses that improve your skills in real estate are deductible. This includes course fees, books, and any travel expenses related to attending seminars or training events. Keep in mind that these deductions only apply to education that enhances your current profession, not if you are training for a new career.
Supplies and Equipment
Supplies like computers, printers, office furniture, and software are all deductible if they are used for business purposes. The IRS allows you to deduct the full cost of certain equipment under Section 179 of the tax code up to a limit of $1,250,000 in 2025. If your purchases exceed this amount, you can deduct the depreciation value over time instead.
Meals with Clients
For 2025, you can deduct 50% of business-related meal costs as long as the meal is not lavish. This applies to meals shared with clients or colleagues, provided that a legitimate business discussion takes place during the meal. Be sure to document the purpose of the meal and the amount spent for accurate deduction claims.
Interest on Business Loans
If you take out a loan for your real estate business, the interest on that loan is deductible. This applies to loans used for purchasing office space, vehicles, or equipment, provided the funds were used strictly for business purposes. Keep detailed records of loan agreements and payments made to ensure accuracy in your filings.
Software and Subscriptions
Real estate agents often rely on software and subscriptions to manage their business. These costs are deductible as long as they are related to running your operations, including CRM software, MLS access, and other business tools like accounting programs.
Now, let’s take a look at some non-deductible expenses for real estate agencies. Sometimes, real estate agents who file their own income tax returns claim these deductions. But this might land them into trouble with the IRS. So we are here to make sure you do not make the same mistake!
Non-Deductible Expenses for Real Estate Agencies
Real Estate Agencies cannot claim deductions for Personal expenses. For example, they cannot claim personal phone bills and vehicle costs that are not related to the business. The agents cannot claim commuting costs between their home and regular office.
If real estate agencies are spending money on any entertainment activities, those deductions are not valid. These events include tickets for shows or events. Even if you are doing these activities to grow your business, they are no longer deductible.
If you are buying clothes like suits that you can wear outside your work, you cannot claim deductions on them too.
Get Expert’s Help
Tax planning and income tax return filing for real estate agents is a tough nut. We hope the information on deductible and non-deductible expenses here will give you better clarity while filing your income tax return.
But if you get stuck anywhere or need expert’s help, we are available here, 24×7. Fill your contact details and we will get back to you right away. For more information, explore our website.
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