If you sell homes on commission, the IRS treats you as a business of one. Every mile you drive to a showing, every MLS invoice, every listing photographer you hire, and every dollar of E&O insurance can lower your tax bill, but only if you can point to the paper trail. This page helps real estate agents identify deductible expenses, document each deduction, and keep receipts organized throughout the year.

How real estate agents get taxed (and why every expense matters)

Licensed real estate agents paid on commission are treated as self-employed by the IRS and file a Schedule C, paying both income tax and self-employment tax on net earnings. Under IRC §3508, licensed real estate agents who are paid based on sales output rather than hours worked, with a written contract stating they won't be treated as employees, are classified as statutory nonemployees.

That classification has two direct consequences at tax time:

• Self-employment tax. On top of federal and state income tax, you owe 15.3% self-employment tax on your net earnings (12.4% Social Security up to the wage base, plus 2.9% Medicare with no cap).

Every deductible dollar cuts both bills.

• Quarterly estimated taxes. Self-employed individuals generally must make quarterly estimated tax payments if they expect to owe $1,000 or more in tax for the year.

Missing a quarter typically means an underpayment penalty when you file.

Many real estate commissions arrive by wire or ACH from the title company or brokerage, so agents often have fewer cash transactions to track. Keeping business money in its own account makes deductions easier to document if the IRS ever asks.

What can a real estate agent write off on taxes?

The general rule from the IRS is that an expense is deductible if it's both ordinary (common in your line of work) and necessary (helpful and appropriate). For a working agent, deductible costs usually fall into these Schedule C categories:

• Brokerage-related fees. Desk fees, transaction fees, commission splits paid to a team lead, and errors and omissions (E&O) insurance premiums are generally deductible business expenses for real estate agents when they are ordinary and necessary.
• Dues and licensing (after your initial license). MLS access fees, NAR and state/local Realtor association dues, license renewals, and lockbox/Supra fees.
• Marketing. Listing photography, drone footage, virtual tours, staging, yard signs and riders, direct mail, Google and Meta ads, printed flyers, your website domain and hosting, and open house materials.
• Vehicle expenses. Using either the standard mileage rate or the actual expense method (details below).
• Client gifts, subject to a $25-per-recipient cap under IRC §274.
• Home office, if the space is used regularly and exclusively for business.
• Phone, software, and tools. CRM subscriptions, transaction management, e-signature tools, design software, cloud storage, and email marketing platforms.
• Continuing education once you're already licensed: CE credits, industry conferences, designation courses (ABR, CRS), and coaching.
• Professional services. Bookkeeper, CPA, and business attorney fees.

How much can realtors deduct for mileage and vehicle use?

Vehicle expenses are typically one of the largest deductions on an agent's return.

The IRS standard mileage rate for business use in 2024 is 67 cents per mile.

You have two methods to choose from:

Standard mileage method. Multiply business miles by the current-year rate. If you drove 12,000 business miles in 2024, that's a $8,040 deduction before you factor in tolls and parking, which are deductible separately.

Actual expense method. Add up gas, insurance, registration, maintenance, repairs, tires, lease payments or depreciation, then multiply by your business-use percentage (business miles ÷ total miles). This method usually wins if you drive an expensive vehicle or put on relatively few personal miles.

You generally have to pick a method the first year you use the vehicle for business. If you take actual expenses with accelerated depreciation, you can't switch back to standard mileage on that vehicle in later years.

Key rules for vehicle deductions:

• Driving between showings, from your home office to a client meeting, or to the title company for a closing is deductible.
• Commuting from home to a regular office you report to daily is not.
• Keep an exportable mileage log with the date, miles, destination, and business purpose; reconstructed logs are harder to substantiate.

Paying for gas, tolls, and car washes with one dedicated business debit card creates a paper trail that sits alongside your mileage log, so when a client asks "which showings did we do that Saturday in April?" the answer is already sorted by date.

Home office deduction for real estate agents

The home office deduction requires regular and exclusive business use of the space, with a simplified method capped at $1,500 (300 square feet at $5 per square foot).

"Exclusive" is the word the IRS cares about: the corner of the guest room that doubles as your Peloton nook doesn't qualify. A closed-door room, a dedicated basement setup, or a converted garage does.

Two methods:

• Simplified method. $5 per square foot, up to 300 square feet, for a $1,500 maximum.
• Regular method. Track actual home expenses (mortgage interest or rent, utilities, insurance, repairs, depreciation) and deduct the business-use percentage. If your office is 200 square feet in a 2,000-square-foot home, that's 10% of eligible costs.

Having a desk at the brokerage doesn't disqualify you. Per IRS Publication 587, the home office qualifies if it's your principal place of business, including the place where you handle administrative and management activities and have no other fixed location where you conduct substantial admin work. For most agents, that's exactly where the invoicing, calls, MLS input, and paperwork happen.

Marketing, tech, and client-facing expenses

• Photography, drone, and virtual tour costs are fully deductible marketing/advertising on Schedule C, Line 8.
• Software subscriptions — CRM, transaction management, design tools, e-signature, scheduling — are deductible in the year paid.
• Client meals are generally 50% deductible when the meal is ordinary and necessary, not lavish, and you or an employee is present with the client.

Keep the receipt with a note of who you met with and what you discussed.

• Client gifts are capped at $25 per recipient per year for deduction purposes under IRC §274. If you spend $150 on a closing gift, $25 is deductible and the rest isn't.

Track the deductible portion separately so your bookkeeper doesn't have to guess.

What retirement, health insurance, and QBI deductions can real estate agents claim?

Three deductions can materially reduce taxable income for eligible agents:

Self-employed health insurance. If you're not eligible for coverage through a spouse's employer, you may be able to deduct qualifying premiums for medical, dental, and long-term care insurance for yourself, your spouse, and dependents as an adjustment to income on Schedule 1. The deduction is generally limited by the net profit from your business.

Lowering AGI can also help you qualify for other tax breaks.

Retirement contributions. A SEP-IRA lets you contribute up to 25% of net self-employment earnings (with a 2024 cap of $69,000). A Solo 401(k) allows employee-side deferrals plus employer-side contributions, which can create a larger deduction at similar income levels, especially if you're over 50 and can add catch-up contributions. Both reduce taxable income dollar-for-dollar.

Section 199A Qualified Business Income deduction. Eligible self-employed real estate agents may claim up to a 20% Section 199A qualified business income deduction.

Real estate sales generally is not treated as a specified service trade or business, but the QBI calculation still depends on taxable income, wages paid, and property basis. Worth an hour with a CPA before year-end.

How should real estate agents track business expenses?

Agents who stay ready for tax season usually reconcile each closing while the details are still current.

Reconcile after each closing. While the settlement statement is still on your screen, log the gross commission, the split to the brokerage, any referral fees paid out, and any transaction-specific expenses (courier, home warranty, closing gift). Tag them by property address in your accounting software so you can see the actual net on each deal.

Set aside tax money the day the commission hits. Set aside a percentage of each net commission for estimated taxes based on your bracket, state taxes, and CPA guidance. In your Novo checking account, you can earmark a portion within a Reserve labeled "Estimated Taxes" and another for "Brokerage Fees" so the money you owe the IRS is clearly earmarked before the quarterly deadline.

This is the same idea behind business sub-accounts: bucket money by purpose so you never accidentally spend the IRS's share.

Use one card for everything business. Novo offers free business checking with no minimum balance and unlimited invoicing, and it integrates with QuickBooks, Xero, Stripe, and Shopify so real estate agents can auto-categorize expenses for Schedule C. Swiping the business debit card at the gas pump, for the drone photographer, or on the Zillow ad routes the transaction into the matching category in your books. Novo is digital-only and does not accept cash deposits, so it fits agents who receive commissions by wire or ACH but may not fit businesses that regularly handle cash. If you want a deeper look at how the account works for agents specifically, see our guide to the best bank for real estate agents.

Export a Schedule C-ready expense report before your Q1 CPA meeting. If your books are tagged by category all year, you can export a categorized report for your CPA instead of sorting receipts in Q1.

A copy-paste Schedule C category cheat sheet

Below is a starter mapping of common agent expenses to Schedule C lines. Save it, adapt it to your practice, and use it as the categorization backbone in your accounting software.

Schedule C Line       | Expense Category            | Example Real Estate Items
--------------------- | --------------------------- | ---------------------------------------------------
Line 8  Advertising   | Marketing & Advertising     | Listing photos, drone, staging, signage, FB/Google ads, website
Line 9  Car & Truck   | Vehicle                     | Standard mileage (67¢/mi 2024) OR actual expenses
Line 10 Commissions   | Referral & Split Fees       | Referral fees paid out, team lead splits
Line 15 Insurance     | Business Insurance          | E&O premiums, general liability
Line 17 Legal & Prof  | Professional Services       | CPA, bookkeeper, business attorney
Line 18 Office Exp    | Office Supplies             | Printer paper, postage, lockboxes
Line 22 Supplies      | Supplies                    | Yard signs, riders, open house materials
Line 23 Taxes/License | Licensing                   | License renewal, local business tax
Line 24a Travel       | Travel                      | Out-of-town conference lodging & airfare
Line 24b Meals (50%)  | Client & Referral Meals     | Coffee/lunch with clients & referral partners
Line 25 Utilities     | Business Phone/Internet     | Business line, portion of home internet
Line 27a Other Exp    | Dues, Subs, Software, CE    | MLS, NAR, CRM, DocuSign, CE courses, coaching
Line 30 Home Office   | Home Office                 | Simplified ($5/sqft up to 300) or Regular method

What are common real estate agent tax deduction questions?

How much do real estate agents pay in taxes? Federal income tax at your marginal bracket plus 15.3% self-employment tax on net earnings, minus deductions and the up-to-20% QBI deduction if eligible. State income tax applies on top in most states. Set aside a percentage of each net commission for estimated taxes based on your bracket, state taxes, and CPA guidance.

Can I deduct my car as a realtor? Yes: either 67 cents per business mile (2024) or the actual expense method, but not personal commuting. Keep a contemporaneous mileage log with date, miles, and business purpose.

Are my real estate license and CE courses deductible? Yes, once you're already licensed and working. The initial pre-licensing course to enter the field is not deductible because it qualifies you for a new trade or business.

Is a real estate coach or mastermind deductible? Yes, as an ordinary and necessary business education expense if it's tied to your current real estate business. Save the invoice and a description of what was covered.

Are staging costs deductible? Yes, as an advertising/marketing expense on Schedule C, Line 8, whether you pay a stager directly or rent furniture yourself.

Can I deduct my clothing? Only if the clothing is branded (logoed) and unsuitable for everyday wear. A normal suit or blazer doesn't qualify, even if you only wear it to showings. A logoed polo or jacket does.

How long do I need to keep tax records? Generally three years from filing under IRS guidance. Six years if you underreport gross income by more than 25%, and indefinitely for unfiled returns or fraudulent returns. Digital copies are fine; the IRS accepts scanned receipts.

Do I have to pay quarterly estimated taxes? If you expect to owe $1,000 or more in federal tax for the year, generally yes. Due dates are typically April 15, June 15, September 15, and January 15 of the following year. Commissions that arrive as an ACH transfer or wire from the title company are easy to time against those deadlines if you set aside a percentage as each one lands.

Disclosures

Novo Platform Inc. ("Novo") strives to provide accurate information but cannot guarantee that this content is correct, complete, or up-to-date. This page is for informational purposes only and is not financial or legal advice nor an endorsement of any third-party products or services. All products and services are presented without warranty. Novo Platform Inc. does not provide any financial or legal advice, and you should consult your own financial, legal, or tax advisors.

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