Real Estate License - Business Deductions

[Kulbart]

s About Taxes)/Real Estate License - Business Deductions Advertisement Expert: John Stancil, CPA - 1/17/2009 I obtained my realtors license in 2008.  I'm wondering what I am allowed to deduct as business expenses in 2008.

I was told I could deduct the following type of expenses and I'm wondering if you can validate for me.  I did NOT generate ANY income(sales) in 2008(for somewhat obvious reasons) -

- Mileage(miles used by personal vehicle for Realtor activities) - since I saw you can not deduct the actual costs of the classes to obtain the license, are we able to deduct the mileage for any Broker required training AFTER obtaining the license?

- Computer Equipment bought(computer, printer, etc.)

- Office Supplies(Folders, envelopes, stamps)

- Service Costs(Cell Phone, Internet Service, Newspaper)

- Realtor Dues & Fees

- Fingerprinting

- Business Cards & Photo

- Names Riders

- Business Name tags

- Advertising(Business Ad in Local publication)

- Costs for joining Business Networking Group(BNI)

- Meals(@50% for networking meetings)

When is educational expense deductible?  How is it deducted?

ANSWER: Arlene,

Thanks for your question.

Most of those, with the exception of the education and cost of the license are deductible on Schedule C.  Meals just for networking purposes are not deductible, there must be a legitimate business purpose at which business is discussed.  The computer is capitalized and depreciated.  If you do not use it 100% for business, the amount of deduction must be reduced by the personal use portion.  

Hope this helps.

John Stancil, CPA

---------- FOLLOW-UP ----------

John - very helpful. Thanks.  Some followup questions, if I may.

Trying to understand what you mean/intend by 'cost of the license'.  After obtaining my license, here are some charges that Keller Williams and Austin Board of Realtors required my to pay.  

Keller Williams - orientation and 7 week training module

Austin Board of Realtors Dues - Membership, Application, ACTRIS, Dkey costs

National Association of Realtor Dues

Texas Association of Realtor Dues

I think you may be referring to these type of charges as "non-deductible":

Texas Real Estate Commission Evaluation of Education Docs

Texas Real Estate Commission Application Fee(for license)

All of the Real Estate Class Costs

Cost for the exam itself

Lastly, it appears that my tax program allows me to choose whether to ammoratize the equipment of take it all in the 1st year.  Does this really matter?  At the moment I choose to take it all the 1st year.

Thanks for your help!

[Markey]

Arlene,

The first group would be deductible.

The second group is not.

You can depreciate the equipment or expense it with a Sec 179 deduction.  If your income is anticipated to be higher in future years,  the deduction would be of more benefit then.  If you do not have any earned income in 08, you cannot expense it this year.

Hope this helps.

John Stancil, CPA