Real estate agents can write off nearly every ordinary cost of running the business, because federal tax law treats agents as statutory nonemployees and therefore as self-employed.1Internal Revenue Service. Statutory Nonemployees That opens up deductions for mileage, marketing, a home office, licensing and dues, equipment, client meals and gifts, health insurance premiums, and retirement contributions, plus a 23 percent Qualified Business Income deduction on top of everything else. Some of these sit on Schedule C and reduce both income tax and self-employment tax. The largest ones sit elsewhere on the return, and agents who don’t know to claim them leave real money behind.
Vehicle and Mileage
For most agents, driving is the single largest business expense. Showings, inspections, client meetings, appraisals, and open houses can put tens of thousands of miles on a car each year. You can use either of two methods.
The standard mileage rate for 2026 is 72.5 cents per business mile.2Internal Revenue Service. IRS Sets 2026 Business Standard Mileage Rate at 72.5 Cents Per Mile, Up 2.5 Cents Multiply your business miles by that rate, and add business-related parking and tolls on top.3Internal Revenue Service. Publication 463 (2025), Travel, Gift, and Car Expenses If you go with the standard rate, you have to use it in the first year the car is available for business.
The actual expense method tracks every car cost — gas, oil, tires, insurance, registration, lease payments or depreciation — and applies the business-use percentage. Drive 70 percent for work, deduct 70 percent of the costs. It’s more paperwork but often produces a bigger deduction on newer or expensive vehicles.
Either way, keep a contemporaneous mileage log with the date, destination, business purpose, and odometer reading. A GPS app makes this painless. Commuting from home to your brokerage office is personal, but driving from the office to a listing, or from a qualifying home office directly to a client meeting, counts as business.
Marketing and Advertising
Advertising is where real estate spending piles up, and almost all of it is deductible as an ordinary business expense.4Office of the Law Revision Counsel. 26 USC 162 – Trade or Business Expenses
- Digital marketing, including social media ads, pay-per-click campaigns, website hosting, domain registration, and SEO services.
- Print materials such as business cards, postcards, mailers, brochures, and newspaper ads.
- Listing promotion: professional photography, drone footage, virtual tours, home staging, and yard signs.
- Branding costs like logo design, branded merchandise you hand out, and your personal agent website.
One nuance. A temporary paper or cardboard sign is fully deductible in the year of purchase, but a permanent metal or illuminated sign with a useful life beyond a year is a capital asset that you’d depreciate or expense immediately under Section 179.
Home Office
If you use part of your home exclusively and regularly for the administrative side of your real estate business, and you don’t do that administrative work at another fixed location, you can claim the home office deduction.5Internal Revenue Service. Publication 587 (2025), Business Use of Your Home A spare bedroom used only as an office qualifies. A kitchen table where you also eat dinner does not; the exclusivity rule is strict.
The simplified method deducts $5 per square foot up to 300 square feet, for a maximum of $1,500.6Internal Revenue Service. Simplified Option for Home Office Deduction No receipts, no depreciation recapture later. For many agents, that’s enough.
The actual expense method usually yields a larger deduction. You calculate the office’s percentage of total home square footage and apply that to rent or mortgage interest, property taxes, utilities, homeowners insurance, and repairs. If the office is 12 percent of the home, you deduct 12 percent of those costs. Homeowners can also depreciate the business portion of the house, which creates a depreciation recapture obligation if you later sell.
Licensing, Dues, Education, and Insurance
The recurring costs of staying in business are straightforward. State license renewal fees, required continuing education, MLS lockbox and key fees, and dues to organizations like the National Association of Realtors and your local board all deduct in full.
One trap for new agents: pre-licensing coursework is not deductible. The IRS treats it as a personal cost of qualifying for a new profession rather than maintaining an existing one. Once you’re licensed, continuing education, designation courses, and skills training are fully deductible.
Errors and omissions insurance, the professional liability coverage most brokerages require, is deductible. So is any other insurance carried specifically for the business, such as a commercial auto rider or general liability policy. Keep those premiums separate from personal insurance on your books.
Equipment, Supplies, Software, and Phone
Everyday supplies — printer paper, ink, postage, file folders — deduct in the year you buy them.7Internal Revenue Service. Deducting Business Supply Expenses Software subscriptions for your CRM, transaction management, e-signature tools, and cloud storage deduct as ongoing expenses. Your cell phone bill is deductible in proportion to business use; estimate 80 percent business use and deduct 80 percent of the bill.
Larger purchases such as a laptop, tablet, listing camera, or drone are technically capital assets with a useful life beyond a year. In practice, Section 179 lets you expense up to $2,560,000 of qualifying equipment in a single year, which covers essentially anything an individual agent might buy. For 2026, bonus depreciation is also back at 100 percent, so qualifying assets can be written off in full the year they’re placed in service.
Client Meals and Gifts
Meals with clients or referral partners are 50 percent deductible.8Office of the Law Revision Counsel. 26 USC 274 – Disallowance of Certain Entertainment, Etc., Expenses Spend $80 on lunch including tax and tip and you deduct $40. The meal can’t be lavish, you or an employee must be present, and you need a record of who attended, the business relationship, and what was discussed.
Client gifts are capped at $25 per recipient per year. That ceiling hasn’t been adjusted for inflation since 1962, so it fills up fast. Branded promotional items costing $4 or less with your name permanently imprinted, distributed widely, don’t count against the $25 limit.9eCFR. 26 CFR 1.274-3 – Disallowance of Deduction for Gifts
Entertainment is a boundary worth flagging. Concert tickets, sporting events, and golf outings are completely nondeductible, even when business is discussed. That rule has been in place since 2018, and agents who still try to write off client entertainment invite audit trouble.
Health Insurance Premiums
This is one of the most overlooked deductions for self-employed agents. If you pay for your own health insurance and aren’t eligible for coverage through a spouse’s employer plan, you can deduct 100 percent of the premiums for yourself, your spouse, your dependents, and your children under 27.10Internal Revenue Service. Instructions for Form 7206 Medical, dental, vision, and qualifying long-term care premiums all count.
The deduction is claimed on Schedule 1 of Form 1040, not on Schedule C. It reduces income tax but not self-employment tax. Even so, for agents paying $6,000 to $15,000 a year in premiums, the income tax savings are significant. Sole proprietors can hold the policy in their own name as long as they’re paying the premiums.
Retirement Plan Contributions
Self-employed agents have access to retirement plans that double as major deductions. Two options dominate.
A SEP-IRA lets you contribute up to 25 percent of your net self-employment earnings, capped at $72,000 for 2026. Setup and paperwork are minimal, and contributions fully deduct. Because all contributions come from the employer side with no employee deferral, you need substantial net income to max it out.
A Solo 401(k) offers more flexibility. You can defer up to $23,500 in 2026 as the employee, plus profit-sharing contributions as the employer of up to 25 percent of net self-employment earnings, capped at the same combined $72,000. Age 50 and older adds an $8,000 catch-up. Agents 60 through 63 get an enhanced catch-up of $11,250. A Roth option is available for after-tax contributions that grow tax-free.
Contributions reduce taxable income dollar-for-dollar. An agent netting $120,000 who puts $30,000 into a SEP-IRA cuts taxable income to $90,000. They don’t reduce self-employment tax, but the income tax savings are meaningful and the money compounds for retirement.
Half of Your Self-Employment Tax
Self-employed agents pay both halves of Social Security and Medicare, a combined 15.3 percent on net earnings up to the Social Security wage base, then 2.9 percent for Medicare above it.11Internal Revenue Service. Self-Employment Tax (Social Security and Medicare Taxes) The deduction most agents miss: you can write off half of your self-employment tax on Schedule 1. On $100,000 of net self-employment income, the SE tax is roughly $14,130, and the deductible half of about $7,065 comes straight off adjusted gross income.
The 23 Percent Qualified Business Income Deduction
On top of every Schedule C deduction, real estate agents can claim the Qualified Business Income deduction, made permanent and increased to 23 percent under the 2025 tax legislation. It’s a personal-return deduction that applies to net business income after other deductions are taken.
Real estate brokerage is not classified as a specified service business, so agents qualify for the full deduction regardless of income level, though wage and capital limits phase in for higher earners. A sole-proprietor agent with $100,000 of qualified business income and no complications would see roughly a $23,000 deduction, with no additional cost or contribution required to earn it.
Agents with taxable income below $201,750, or $403,500 filing jointly, before the QBI deduction generally take the full amount. Above those thresholds, the deduction is gradually limited based on W-2 wages paid by the business and the cost of depreciable property. Sole proprietors who don’t pay themselves W-2 wages may see the deduction reduced at very high income levels.
Where Each Deduction Goes and What to Keep
Business income and most expenses flow through Schedule C, producing a net profit or loss.12Internal Revenue Service. About Schedule C (Form 1040), Profit or Loss from Business (Sole Proprietorship) Schedule SE calculates self-employment tax on that net profit. Health insurance, retirement contributions, and half of self-employment tax are claimed separately on Schedule 1 as adjustments to gross income; they reduce your taxes but live outside Schedule C. The QBI deduction is taken on the personal return after AGI.
Every deduction needs backup. Keep receipts, bank statements, and invoices organized by category. Maintain a mileage log with date, destination, miles, and business purpose for each trip.13Internal Revenue Service. Instructions for Schedule C (Form 1040) (2025) For meals and gifts, record who you met with, their business relationship, and what you discussed. Electronic records are fine, so a well-organized cloud folder of scanned receipts works as well as a filing cabinet. Agents who get into trouble at audit aren’t the ones who deducted too much; they’re the ones who couldn’t prove what they deducted.