Many new agents have been regular salaried employees for most of their careers, and they know that taxes are different for independent contractors, or the self-employed, but they don’t know what the differences are. As a real estate broker and instructor, let me share some of my experience with you, but remember that if you want tax advice, you should consult a tax professional. I share my thoughts for informational purposes only.
The primary difference is that when you are self-employed, you act as a business. Any expenses that you incur must be reported on a Schedule C.
First off, is the sales agent pre-license course tax deductible? Now there is a provision that work-related education that is required by the state to keep your job is generally tax deductible. Note that this is to Keep you job. So this provision would apply to any continuing education that you pay for after you are licensed. The pre-license course comes before, so it wouldn’t really be included here. However, you might still be able to deduct the pre-license course cost as a business startup expense. Take a look at the rules around those expenses, and see if they apply to you in your situation.
The state of Utah does require that agents take 18 hours of continuing education credits, so those costs would likely be deductible under that provision.
Many real estate agents are members of various trade associations, such as the Association of REALTORS. Those costs can also often be tax deductible as a business expense, if they are legitimately benefiting your business and allowing you to work more efficiently to serve your clients. Take note however, that some associations also encourage donations to political action groups, and those donations are not tax deductible.
When you are self-employed, you can also deduct other common business expenses, such as office space, office supplies, vehicle miles and maintenance, as long as the vehicle is being used for business purposes. Make sure you separate clearly your expenses that are for the business, and for personal use, because you have to document clearly that any expenses you want to deduct, are spent on the business itself.
I hope these tips give you a good starting point on what to consider as you begin working as an agent. Remember to consult a tax professional to find out which of these apply to your situation