Diane Kennedy, CPA
What to Do If Your Books Are a Mess and Taxes Are Due
If your bookkeeping is behind and a tax deadline is looming, accuracy matters more than speed. This guide explains what not to do, what to prioritize...
Generic tax checklists often miss these real estate-specific deductions, like commission splits, high-mileage fieldwork, and listing prep costs. Learn what these deductions are and also how to document expenses and stay compliant as your business grows.
If you ask, “What’s deductible?” you’ll usually get a generic small-business checklist.
Office supplies. Advertising. Utilities. Insurance. Meals. Education.
But, there’s a problem. Traditional tax lists weren’t written for real estate agents.
They assume that a real estate agent is just like a standard, uncomplicated business. They have:
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A storefront
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Fixed hours
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Employees on payroll
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Predictable revenue
Your real estate business is different. You check into your office. You don’t really work there. You drive constantly. You’re always marketing. You split income. You spend money staging property you don’t own.
If your tax strategy treats you like a run-of-the-mill independent contractor, you may be missing deductions unique to how agents actually work.
Here are agent-specific expense areas that are often misunderstood outside of the industry.
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1. Commission Splits and Referral Fees
In any other business, a Form 1099 is likely going to tie pretty closely to the income that you report.
As a real estate agent, that Form 1099 might be just the beginning of the calculation. You may need to report the full amount as income. You may need to split some of it as an expense.
This is one of the most misunderstood areas in real estate taxation.
If your brokerage issues one 1099 to you for the full commission, but you split that commission with another agent or pay referral fees, follow these steps:
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Report the full income
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Deduct the split as an expense
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Potentially issue 1099s to the agents you paid
If you forget the deduction, you’ll pay too much in taxes. If you try to net it and not report the 1099 income on your return, you may get an unpleasant letter from the IRS.
You are taxed on income you receive, but you are also entitled to deduct what you pay out.
2. Vehicle Use Is Not “Just Mileage”
You don’t make money with your real estate business by sitting in an office. It’s a mobile business. You’re racking up miles driving to listings, showing, inspections, appraisals, closing plus handling all the delivery work of keys, materials and signs.
It’s easy for agents to forget just how many miles they drive in a day. And that’s a shame.
Mileage only counts if it’s tracked.
Lettuce can keep your books current with automated transaction categorization and year‑round tax organization, so you’re not scrambling at filing time to match mileage logs to business activity.
One little insider tip for real estate agents has to do with your home office. The commute from your home to your first business location is a commute. Once you’re there, though, your drive from there to the second location is deductible.
Now here’s the bonus. If your home qualifies as your principal place of business, your deductible mileage may increase because you are traveling between business locations rather than commuting.
Vehicle deductions are often one of the largest write-offs for agents.
3. Staging, Photography, and Listing Preparation
Unlike most businesses, agents often incur expenses to improve property they do not own. That can include staging, furniture rental, photography, even minor repair, cleaning and landscaping. And don’t forget the refreshment for open houses and the cookies you bake to make the home smell warm and inviting.
These are all marketing expenses.
One investor preparing to sell a former rental property spent nearly $20,000 upgrading it into a showcase listing. There was just one problem: the neighboring home had become rundown. Trash in the yard. Peeling paint. It hurt the entire curb appeal.
He approached the neighbor and offered to send his crew over, at his own expense, to repaint the exterior and clean the yard. The neighbor could choose the color, within reason. No charge.
That type of strategic spending does not show up on a generic checklist.
Real estate often involves creative, situational decisions to protect value and maximize sale price.
Understanding how those costs are treated requires someone who understands how the industry actually operates.
4. Marketing That Blurs the Personal Line
Real estate marketing often overlaps with personal brand building.
You’ve probably seen the billboards, bus stop signs and brochures. All those professional headshots are marketing expenses. So is social media advertising, listing video production, branded closing gifts, and mailers.
Does the expense exist because you want to generate more commission income? If so, you may have a deduction.
5. Brokerage and Licensing Costs
Real estate agents have recurring costs that many other businesses do not such as MLS dues, brokerage desk fees, licensing fees, continuing education as well as errors and omissions insurance.
These are regular business expenses for a real estate agent.
6. Team and Contractor Payments
As agents grow from solo operators to actual small businesses, they’ll start paying more people. That list may include showing agents, buyer’s agents, transaction coordinators, virtual assistants, marketing contractors, photographers, and social media managers.
Independent contractor payments may require 1099 reporting. Administrative staff may require payroll.
The deduction is only part of the conversation. Compliance matters too.
Think Like an Operator, Not Just an Agent
Why do agents miss deductions? It is rarely because they are careless or lazy.
It is because they rely on generic small-business advice.
Real estate is not a traditional storefront model.
It is a commission-based, mobile, relationship-driven business with unique expense patterns.
As income grows, so does complexity.
At six figures, the difference between “generic tax prep” and “agent-specific strategy” can become meaningful.
Real estate is not a static business. Your tax strategy shouldn’t be either.
Frequently Asked Questions About Real Estate Agent Deductions
Can real estate agents deduct commission splits?
Yes. Commission splits and referral fees are typically deductible business expenses if properly documented.
Is mileage deductible for real estate agents?
Mileage to listings, showings, inspections, and other business activities may be deductible. Commuting rules and home office qualification affect how mileage is treated.
Are staging and photography expenses deductible?
If incurred to generate commission income, these expenses are generally considered marketing costs and may be deductible.
Can I deduct MLS and licensing fees?
Yes. Required licensing, MLS dues, and brokerage fees are ordinary and necessary business expenses.
Do real estate agents miss deductions?
Often, yes. Sadly, this most likely occurs when a real estate agent uses generic small-business advice that does not account for how commission-based real estate works.
With deductions, the win is knowing what’s eligible AND keeping clean, audit‑ready records all year. Lettuce is an automated tax and accounting system for businesses‑of‑one that helps organize your bookkeeping, simplify tax planning, and (when you qualify) automate the S Corp setup and ongoing compliance, so you can focus on clients, not spreadsheets. Get started today!
This article is part of the Tax Strategy Series, featuring in-depth, practical guidance from Diane Kennedy, CPA—bestselling author, strategic tax consultant, and founder of USTaxAid and KennedyTax.tax. Explore the full series and catch every installment here.