Industry Data: Tax-Saving Tactics for Real Estate Professionals

Real estate professionals face unique challenges and opportunities when it comes to running a business, and 2023 put those challenges under a microscope. Rising interest rates and economic uncertainty led to a slow year for many professionals, and this is reflected in their tax savings.

Our 2023 Self-Employed Tax Savings Report highlighted some interesting findings for this industry. You can download the full report here:

AVERAGE TAX SAVINGS FOR REAL ESTATE AGENTS

In 2023, the average tax savings for real estate agents totaled: $13,728 per year, which is 2.9% lower than our report average. With low inventory, high interest rates, and a variety of regulatory changes en route, real estate agents faced a slower season than they'd seen in years, but the savvy agents were still able to pocket as much of their hard earned income as possible.

We analyzed the average tax savings by strategy, for the agents who used those tactics. The biggest savings comes from filing as an S-Corporation, which many real estate agents don't realize is an option that can save them tens of thousands on self-employment taxes each year.

• S-Corp savings: $8,776 on average
• Auto deductions: 8.4% higher than the overall average

Key strategies for real estate pros:

1. Maximize auto deductions: Real estate pros live in their vehicles. This can be an incredibly impactful tactic in this industry, putting nearly $1,000 back in your pocket each year. Track all business mileage meticulously.
2. Leverage S-Corp benefits: This structure can significantly reduce taxes, allowing you to bypass the 15.3% mandatory self-employment tax.
3. Don't neglect retirement savings: Only 36% of real estate agents utilized this strategy, lower than other industries. The benefits here are two-fold: First of all, you put capital assets to work for you, but second of all, as an S-Corp, you can save for retirement pre-tax.
4. Home office deductions: If you work from home, this can be a valuable write-off
5. Healthcare deductions: Real estate agents were able to save $1,257 per year on their taxes by claiming their healthcare coverage.

While 2023 was a challenging year for many in real estate, implementing these tax strategies can help professionals in this industry keep more of their hard-earned money, providing a buffer against market fluctuations.

Remember, every real estate professional's situation is unique. Consult with a tax professional to ensure you're maximizing your deductions and minimizing your tax liability.