The tax season could be a little overwhelming for real estate agents. The key to getting through the process is to be prepared well in advance. Fortunately, there are many effective tax strategies for real estate agents to get back the money they deserve. You can follow them thoroughly and take expert help wherever required for handling your taxes.

Listed below are the best of these strategies.

Well-Maintained Expense Record

Expenses made throughout the year must be tracked and recorded on a weekly or monthly basis. Costs related to the business field and regular business operations can be filed as deductibles. Some ordinary expenses include real estate license renewal fees, operational costs (phone bills, rent, business supplies, closing gifts, and so on), and the costs associated with creating a real estate website.

Expenses incurred by a product or service used for both business and personal purposes can still be filed. However, divide the expense to ensure that the deduction applies only to the business part of the expense.


Equipment needed for your business, furniture, cost of improvements made to the rental property, etc., are expected to last for more than a year. However, these factors depreciate with time.

Section 179 allows real estate investors to file these expenses and deduct the full cost in the year of purchase, rather than waiting all through their active lifetime.

Professional Help

Hire a tax planning and accounting firm to understand the best tax strategies for real estate agents. A respected and knowledgeable tax firm will bring in the best cost savings for both full-time and part-time real estate investors. The cost of hiring a firm can be easily justified with the amount of savings they could potentially bring to your business.

1031 Exchange

1031 Exchange takes its name from Section 1031 of the IRC in the United States. The procedure allows real estate investors to defer capital gains tax. This is accomplished by investing the profits from the sale of a property into buying another replacement property.

The replacement property must be a similar one, and the value of the property must be equal to or greater than the property sold. The process must be completed within certain time limits and with the help of a qualified intermediary.

Short- and Long-term Capital Gains

When you sell a property that you have held for less than a year, the sale’s profits will be subjected to short-term capital gains tax. However, for properties held for more than one year, the long-term capital gains tax is applicable.

Long-term capital gains tax rates vary based on the filing status and taxable income. But the long-term capital gains tax rate is always lower than the short-term capital gains rate. Thus, holding property for more than a year would be a profitable tax strategy for real estate agents.

Planning Your Retirement

A retirement plan can ensure financial independence for the future and help in saving tax money too. Look out for the best retirement plans and start funding the plans with your income. The money put into retirement plans will not be taxed.

A self-directed IRA (Individual Retirement Account) allows you to invest in a property without incurring any withdrawal penalties. Investors take advantage of the low-interest rate and end up making more money through the property than the interest paid. When the property is sold, and the money is returned to the IRA account, the money is eligible for the same tax differential treatment.

Tax saving strategies for real estate agents can be an essential part of any wealth-building plan. By using these strategies, you will be able to offset a significant percentage of the taxes and thus be able to earn and save more.