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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!
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.
$9.95/mo. Realtyzam is one of the best pieces of real estate accounting software in any category. Extremely simple and easy, other software could take some pointers from Realtyzam’s excellent usability. Track your commissions, closings, expenses, and P&L like a pro. It links with your bank account to track and categorize expenses automatically. It has just about everything you need as a single agent for your taxes and financials.
$12.50+/mo. QuickBooks Online is the Big Kahuna of business accounting. It has the full suite of accounting tools that you would ever need for your real estate business. If you are a small team or bigger, you are going to want to strongly consider QuickBooks as the real estate brokerage accounting software of choice.
$6+/mo. Freshbooks is a small business accounting software that is capable of tracking your income and expenses, as well as billing invoices and tracking time.
$12+/mo. Xero is a major cloud based accounting software headquartered in New Zealand. They have billing, invoice, income, expense, project management, and payrolls tools. They have an app add-on called “Re-leased” designed 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.
FREE+. Hurdlr is a small business and real estate mileage tracker app that automatically tracks your miles, income, expenses, tax liability, and tax deductions all in real-time. Hurdlr ensures you are ready to make the most of your available deductions come tax time.
FREE+. MileIQ is a mileage tracker owned by Microsoft. It automatically creates a mileage log when you are moving in a car, and you can quickly classify your trips as a business expense or personal.
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.
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.
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:
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.