You just earned your first $10,000 commission check. It feels amazing. You spend it on bills, a new laptop, and a celebratory dinner.
Then April 15th hits. You realize you owe the IRS $3,000, and you don't have it.
As an independent contractor (1099 employee), no one withholds taxes for you. But the good news is that the tax code is written to favor business owners—if you know what to deduct.
Most new agents leave thousands of dollars on the table because they don't track the "boring" expenses. Let's fix that.
1. Why Agents Overpay Taxes
The biggest mistake agents make is thinking only "big" expenses count. They track their car payments and their MLS dues, but they forget the $12/month Canva subscription, the client coffees, and the parking fees.
The Golden Rule: If you spend money to try to make money, it is likely deductible.
2. Marketing & Lead Gen Deductions
Real estate is a marketing business. Almost every dollar you spend getting your name out there reduces your taxable income.
✅ Marketing Write-Offs
3. The Vehicle Deduction (Mileage vs. Actual)
This is usually an agent's biggest deduction. You have two choices:
- Standard Mileage Rate: [Image of car odometer] In 2025, the IRS rate is likely around 67 cents per mile (check current rate). If you drive 10,000 miles for work, that's a $6,700 deduction.
- Actual Expenses: You track gas, insurance, repairs, and depreciation.
Pro Tip: Unless you drive a very expensive car (like a G-Wagon) or have low mileage, the Standard Mileage Rate is usually better and much easier to track. Just use an app like MileIQ.
4. The Home Office Myth vs. Reality
Many agents are scared to take the Home Office deduction because they heard it triggers an audit. This is largely a myth if you follow the rules.
The Rule: The space must be used exclusively and regularly for business.
- Allowed: A spare bedroom with your desk and files.
- Not Allowed: Your dining room table where you also eat dinner.
If you qualify, you can deduct a percentage of your Rent/Mortgage Interest, Utilities, and Wi-Fi based on the square footage of the office vs. the whole house.
5. The Master Checklist (Copy-Paste)
Save this list. Every time you spend money on these items, save the receipt or log it in QuickBooks.
Education & Licensing
- Continuing Education (CE) courses
- Real Estate Coaching
- Conferences and Seminars (Ticket + Travel)
- MLS Dues and Association Fees (NAR, Local Board)
- E&O Insurance Premiums
Technology & Equipment
- Cell Phone Bill (Business % portion)
- Laptop or iPad purchased for work
- Camera or Drone for listings
- Electronic Lockboxes (Supra keys)
What You CANNOT Deduct
Don't get cute. These will get you flagged:
- Clothing: Suits and dresses are not deductible unless they are a "uniform" (which real estate is not).
- Gym Memberships: Looking good is not a business expense.
- Lunch by Yourself: You can only deduct meals if you are with a client or prospect.
Conclusion
Keeping more of your commission starts with smart bookkeeping. If you earn $100,000 but have $30,000 in valid deductions, you only pay taxes on $70,000. That could save you $8,000+ in taxes.
Want to see how these expenses affect your bottom line? Plug your marketing costs into our Calculator below.