Real estate agents working as independent contractors can deduct ordinary and necessary business expenses on Schedule C of Form 1040, which lowers both income tax and the 15.3% self-employment tax.1Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses The categories that move the needle most for agents are vehicle mileage (72.5 cents per mile in 2026), home office use, marketing and advertising, brokerage and MLS fees, license renewals and continuing education, errors and omissions insurance, equipment and software, client meals at 50%, self-employed health insurance, retirement plan contributions, and the 20% qualified business income deduction. Each has its own rules on eligibility and documentation, and the difference between claiming them correctly and guessing at year-end is often thousands of dollars.
Vehicle and Mileage
Driving to listings, showings, inspections, and closings is typically the single largest deduction on an agent’s return. For 2026, the IRS standard mileage rate is 72.5 cents per mile, and it applies to gasoline, diesel, hybrid, and fully electric vehicles.2Internal Revenue Service. IRS Sets 2026 Business Standard Mileage Rate at 72.5 Cents Per Mile, Up 2.5 Cents Fifteen thousand business miles at that rate is a $10,875 deduction.
You can instead deduct actual vehicle expenses: gas, oil changes, tires, insurance, registration, repairs, and depreciation, prorated by business-use percentage if the car also handles personal driving. One timing rule matters. If you want the option to switch between the two methods in later years, you must pick the standard mileage rate in the first year the car is placed in business service.3Internal Revenue Service. Topic No. 510, Business Use of Car Leased vehicles must stay on the standard rate for the full lease term, including renewals.2Internal Revenue Service. IRS Sets 2026 Business Standard Mileage Rate at 72.5 Cents Per Mile, Up 2.5 Cents
Whichever method you use, keep a contemporaneous log showing date, destination, miles driven, and business purpose for each trip.4Internal Revenue Service. Publication 463 – Travel, Gift, and Car Expenses An app that captures trips as they happen is far more defensible than a spreadsheet reconstructed in April.
Marketing and Advertising
Property signage, listing photography, website hosting, business cards, flyers, and paid social campaigns are all ordinary and necessary expenses for an agent and fully deductible.5Internal Revenue Service. Ordinary and Necessary The test is whether the expense is common in the industry and helpful to your business, not whether it is strictly indispensable.
The gray zone is networking that blends into personal life. A targeted Facebook ad campaign for buyers in your zip code is clearly business. A charity gala ticket where you happen to hand out cards is harder to defend. Ask whether the primary purpose was generating real estate business or something else.
Client Meals
Meals with clients or prospects where business is actually discussed are 50% deductible in 2026. The meal can’t be lavish, a business representative must be present, and you should note on the receipt who attended and what was discussed. The temporary 100% deduction for restaurant meals from 2021 and 2022 has expired.
Home Office, Phone, and Internet
If you handle listings, paperwork, and client communication from home, you can claim a home office deduction, but the space must be used exclusively for business and used regularly as your principal place of business or a place where you meet clients.6Internal Revenue Service. Publication 587 – Business Use of Your Home A guest room that occasionally hosts your laptop doesn’t qualify. Neither does a corner of the living room.
The simplified method gives you $5 per square foot of qualifying space, capped at 300 square feet, for a maximum of $1,500.7Internal Revenue Service. Topic No. 509, Business Use of Home The actual expense method typically produces a bigger deduction but takes more work: you calculate the business-use percentage of your home’s square footage, then apply that percentage to mortgage interest or rent, utilities, insurance, repairs, and depreciation.6Internal Revenue Service. Publication 587 – Business Use of Your Home
Communication costs follow the same business-use logic. A dedicated business phone line is fully deductible. A cell phone or home internet connection shared with personal use is deductible only in proportion to business use. Pick a reasonable percentage and apply it consistently.
Equipment, Technology, and Software
Laptops, tablets, printers, listing cameras, and office furniture used primarily for business are deductible. Under Section 179, most agents can write off the full purchase price in the year of purchase rather than depreciating it over several years. The 2026 Section 179 limit is $2,560,000, which is effectively unlimited for a sole proprietor. The equipment must be used more than 50% for business and placed in service by December 31.
Software subscriptions — CRM platforms, transaction management tools, e-signature services, design tools like Canva — are deducted as paid rather than capitalized, since they’re recurring service costs.
Dues, Brokerage Fees, License Renewals, and Insurance
State license renewal fees, National Association of Realtors dues, local and regional board dues, and MLS subscriptions are all deductible business expenses. One carveout: the portion of NAR dues allocated to lobbying and political activity is not deductible under federal law.8Internal Revenue Service. Nondeductible Lobbying and Political Expenditures NAR publishes the non-deductible percentage each year on your dues statement.
Desk fees, transaction fees, and administrative charges your brokerage collects go straight onto Schedule C as business expenses. Errors and omissions insurance premiums are fully deductible, as is general liability coverage. Because these costs reduce net profit before self-employment tax is calculated, the savings run beyond income tax.
Continuing Education and Designations
Every state requires continuing education to renew a real estate license, and those course fees are deductible. The IRS rule is that the education must maintain or improve skills for your current work, or be legally required to keep your license.9Internal Revenue Service. Topic No. 513, Work-Related Education Expenses Coursework that qualifies you for an entirely new profession doesn’t count, which rarely affects agents.
Conference registrations, seminar fees, and related travel qualify when the primary purpose is professional education. Designations like the Certified Residential Specialist or Accredited Buyer’s Representative are deductible because they build on your existing field. Business coaching fees also qualify when the coaching directly relates to your real estate work.
Health Insurance and Retirement Contributions
Two of the largest deductions available to self-employed agents don’t appear on Schedule C, which is why they get missed.
Self-Employed Health Insurance
If you pay for your own medical, dental, or vision coverage and are not eligible for a subsidized plan through a spouse’s employer, you can deduct 100% of the premiums on Schedule 1 of Form 1040 using Form 7206. The deduction is disallowed for any month you were eligible for subsidized employer coverage, whether or not you enrolled.10Internal Revenue Service. Instructions for Form 7206 – Self-Employed Health Insurance Deduction Premiums for your spouse and dependents also qualify.
Retirement Plans
A SEP IRA allows contributions of up to 25% of net self-employment earnings, capped at $72,000 for 2026.11Internal Revenue Service. SEP Contribution Limits (Including Grandfathered SARSEPs) A Solo 401(k) reaches the same overall ceiling but layers on an employee elective deferral of up to $24,500, or $32,500 if you’re 50 to 59 or 64 and older, and $35,750 if you’re 60 to 63.12Internal Revenue Service. COLA Increases for Dollar Limitations on Benefits and Contributions That extra deferral makes the Solo 401(k) attractive when your net earnings are moderate but you still want to shelter a large percentage of them.
These contributions reduce adjusted gross income on Schedule 1 rather than net profit on Schedule C, so they cut income tax but not self-employment tax. Even so, the tax savings on a substantial retirement contribution can easily run into five figures.
Qualified Business Income Deduction
Section 199A lets eligible self-employed individuals deduct up to 20% of qualified business income, which for an agent is 20% of Schedule C net profit.13Internal Revenue Service. Qualified Business Income Deduction The deduction is taken on your personal return and doesn’t require itemizing. Net profit of $100,000 could produce a $20,000 deduction.
Real estate brokerage is not classified as a specified service trade or business under Section 199A, so agents can claim the full deduction regardless of income, unlike doctors or lawyers, who face phase-outs. The deduction is capped at the lesser of 20% of qualified business income or 20% of taxable income before the deduction, minus net capital gains.13Internal Revenue Service. Qualified Business Income Deduction The provision was originally set to expire after 2025 and has since been extended; confirm current thresholds with the IRS or a tax professional before filing.
Recordkeeping That Holds Up
Every deduction above depends on documentation. For each expense, keep a receipt or digital record showing date, amount, vendor, and business purpose. A dedicated business bank account and credit card make the paper trail obvious and cut hours out of tax prep. Your brokerage will send you Form 1099-NEC showing non-employee compensation of $600 or more; that income and your deductions flow through Schedule C, with vehicle information reported in Part IV.14Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC15Internal Revenue Service. Schedule C (Form 1040) – Profit or Loss From Business
The IRS pays closer attention to Schedule C returns where deductions look large compared with reported income. Underreporting income or overstating deductions through negligence can trigger an accuracy-related penalty of 20% of the resulting underpayment.16Internal Revenue Service. Accuracy-Related Penalty Agents who track expenses as they occur consistently claim more legitimate deductions than those who reconstruct the year in March, because the receipts are still there.
Quarterly Estimated Payments
Nothing is withheld from your commission checks, so you owe quarterly estimated tax to the IRS. For 2026 the due dates are April 15, June 15, September 15, and January 15, 2027.17Internal Revenue Service. 2026 Form 1040-ES – Estimated Tax for Individuals You can skip the January payment if you file your return and pay the full balance by February 1, 2027.
The safe harbor keeps you out of penalty territory if your payments and withholding cover at least 90% of current-year tax or 100% of last year’s total tax, whichever is smaller. If your prior-year adjusted gross income topped $150,000 ($75,000 if married filing separately), the second threshold rises to 110%.18Internal Revenue Service. Underpayment of Estimated Tax by Individuals Penalty Commission income swings with the market, so a strong prior year is not always a reliable guide to what you’ll owe next April.