Real Estate Agent Tax Tips
Real estate agent tax tips can help you determine if you need additional help in organizing or categorizing your possible tax deductions. Some tax deductions have consequences of locking you into a certain type of accounting or depreciation method. Even if you chose something in the past that was the right decision at the time things may have changed. Your income of expenses may be up or down. Do you really want to wonder if you are paying too much in taxes? Here are some tax tips to help you think about how you currently do business:
Car expenses: One of your major deductible expenses is business use of your car. You may compute your deduction using either of two methods: the actual cost method or the standard mileage method. With the actual cost method, you may deduct the actual expenses of operating your car for business. This includes gas, tolls, insurance, parking, repairs, maintenance, license, loan interest, and depreciation. With the standard mileage method, you simply multiply your business miles driven during the year by the IRS’s standard rate for the year
- You can also deduct related tolls, parking fees, and the business portion of interest expense on your car loan.
- Before choosing the method for deducting car expenses, consider the tax consequences of each method. The price for using the mileage rate’s simplicity may be lost deductions.
- You can switch to the actual cost method for car expenses even if you started with the standard mileage rate. However, once you begin using the actual cost method on a vehicle, you can’t switch to the standard mileage rate for that vehicle.
Don’t underpay your taxes. There is no income tax withholding on self-employment income, but that doesn’t mean you’re not required to pay taxes during the year. Self-employed individuals generally are required to pay taxes through quarterly tax payments due April 15, June 15, September 15, and January 15 of the following year. Set up quarterly estimated tax payments and make these payments on time. Late or inadequate payments mean you’ll be assessed penalty and interest charges in addition to your income tax liability.
How To Figure Estimated Tax: To figure your estimated tax, you must figure your expected adjusted gross income, taxable income, taxes, deductions, and credits for the year.
- When figuring your estimated tax for the current year, it may be helpful to use your income, deductions, and credits for prior year as a starting point. Use your prior year’s federal tax return as a guide. You will need to estimate the amount of income you expect to earn for the year.
- If you estimated your earnings too high, simply complete another Form 1040-ES worksheet to refigure your estimated tax for the next quarter. If you estimated your earnings too low, again complete another Form 1040-ES worksheet to recalculate your estimated tax for the next quarter. You want to estimate your income as accurately as you can to avoid penalties.
- You must make adjustments both for changes in your own situation and for recent changes in the tax law.