What was your volume last year? What do you need to set aside in quarterly estimated taxes?
How many miles have you traveled that are tax-deductible (and can you prove it to the IRS?)
Real estate agents need to be on top of these questions!
Get tools to track your mileage, expenses, and income. A businessperson should always know their numbers.
First, I recommend agents get a CPA right after you pass your license.
Second, I recommend getting both a simple commissions tracking tool and a mileage and expense tracker. Both are cheap or even free. And you’ll thank your stars come April, one of the busiest months for Realtors, that you were so well organized!
Top Accounting Software for Real Estate
There are many small business accounting tools. Each of these has their own strengths, and it may even be useful to pair more than one together. For example, I personally use both Realtyzam and Quickbooks.
Whatever accounting software you use, you will also want to have a real estate mileage tracker with you. A good mileage tracker will automatically track your miles for you as long as the app is active on your phone. The app can tell you are moving faster than walk speed and starts tracking your journey automatically. Those miles can then be easily deducted come tax time!
Below are some of the best cloud-based options to consider for real estate accounting software.
If you're looking for a small business accounting software that is capable of tracking your income and expenses, Freshbooks is a great option. It's easy to use and has a lot of features, making it a great choice for businesses of all sizes.
Our app is designed to help small business owners and real estate professionals keep track of their mileage, income, expenses, and tax liability - all in real-time. With Hurdlr, you're guaranteed to make the most of your deductions when it comes time to file your taxes.
MileIQ is a great tool for keeping track of your mileage and categorizing your trips. It is owned and operated by Microsoft, so you can be sure that your mileage logs are always accurate.
If you are looking for a comprehensive and user-friendly business accounting software, QuickBooks Online is the perfect choice for your real estate brokerage. With its wide range of features, it is sure to meet your needs and help you streamline your business operations.
Realityzam is a powerful real estate accounting software that is easy to use. It is perfect for agents who want to keep track of their commissions, closings, expenses, and profits in one place. It also links to your bank account to automatically track and categorize expenses. This software is a must-have for agents who want to prepare their taxes and financial reports correctly.
Xero is a well-known and well-respected cloud-based accounting software company headquartered in New Zealand. They offer a wide range of tools for businesses of all sizes, including billing, invoice, income, expense, project management, and payrolls. Their “Re-leased” app add-on is designed specifically for property managers.
Below are apps that each track your mileage. These mileage tracking apps usually will start automatically when in motion, tracking your mileage deduction in real-time. The app runs in the background on your phone and allows you to later classify expenses as business or personal.
You can also usually log receipts and other expenses in these apps, like business lunches, so that you aren’t missing any Realtor deductions.
More Real Estate Accounting Software
- Microsoft Dynamics GP
- Taxbot (was acquired by Hurldr)
Using Brokerage Software or Your CRM
Most brokerage software or property management software has accounting, commission management, financial planning tools, and compliance tracking. These may not feature HR tools, real estate expense tracking, and other features. These may be suitable to basic accounting needs, though likely inadequate for any business that has a payroll.
Many platforms and some CRMs have commission tracking, transaction management, and accounting tools in their backend as well. Check with your current tools to see if their functionality is sufficient for your needs.
Taxes and Legal Compliance
As independent contractors, real estate agents can deduct all their business expenses, including car mileage and home office deduction.
Keeping your accounting clean will be critical to maximizing your deductions while keeping yourself bulletproof versus an audit. It is critical to avoid mixing your personal and professional finances.
If you haven’t already, you will want to create separate business bank accounts, including your own business bank and credit cards to pay business expenses. This will make your quarterly bookkeeping easy to track for you and your accountant.
Real estate brokerages have more requirements like separate trust accounts for security deposits and agent commissions. For brokerages and teams with W2 employees, there are additional social security payroll taxes and withholdings that must be accounted for. Using comprehensive software like Quickbooks will make these reporting requirements painless.
What to Look for in Real Estate Accounting Software
For the individual agent, I recommend combining Realtyzam with real estate expense tracking from one of the 3 recommendations above.
Realtyzam will handle your P&L for your taxes. The expense tracker will allow you to justify your mileage expenses and be an easy way to save receipts in case the IRS gets too curious. And you can easily track all your real estate transactions.
For larger operations, even at a team level, you’ll want to graduate to more sophisticated accounting software.
Some features common to accounting software are probably not as critical to many real estate businesses, like billing or inventory. Critical features to consider include:
- tax preparation
- W2 payroll
- cloud-based versus offline
- easy to export your data
Many of these real estate accounting software options helpfully have a free trial. I recommend taking advantage of those to test several different solutions and which fits you and your style best.
But whatever you do, don’t leave this page without at least one Realtor expense tracker app on your phone. Even a new or part-time agent is going to incur $1000s of deductible expenses that you don’t want to be figuring out in tax season.