Last updated on: June 10, 2022
As a realtor, using your vehicle for business purposes uses up a huge amount of your miles. Regardless of whether you are driving a potential future homeowner to 5 different locations on a Sunday or going to get snacks for your open house, these trips will all be tax-deductible for you, as you drove your car for business purposes.
The IRS announces a Standard Mileage Rate every tax year that taxpayers can use to calculate their vehicle expenses for tax deduction purposes. The 2022 Q1 & Q2 Standard Business Mileage Rate is 58.5 cents/mile, with the rate for 2022 Q3 & 4 being 62.5 cents/mile, which can quickly add up to a considerable amount in tax deductions, which means more money in your wallet.
Annual business mileage for a realtor is around 3,000 – 10,000 miles a year. This means a tax deduction of $4000-12,000 on average.
Let’s take a look at a specific example:
The 2022 Standard Mileage Rate for Business purposes is 58.5 cents/mile in the first half and 62.5 cents/mile in the second half of 2022.
Let’s look at Emma for instance. She is a Real Estate Agent who had 5 clients who were looking for properties this month. Emma calculates that she drives around 90 miles per day between properties and work meetings. She hosts open houses, goes to realtor-sponsor lunches, and looks at a potential “pocket listing” house. And so on.
90 miles per day on average, for approx 300 days a year means that Emma drove 27,000 miles in a year for Business purposes. Calculating an average of 60.5 cents per mile for the whole year, Emma can claim $16,000 in tax deductions on her taxes.
You can drive more (or less) miles than Emma, you can undoubtedly see how this tax deduction is a successful realtor’s primary concern.
What to do now as a Real Estate Agent?
You need supporting IRS-Proof Mileage Logs to claim a Vehicle Deduction. If your Claim is ever Audited, the IRS will expect you to have precise Mileage logs.
Your Mileage log must include:
- The total Mileage you drove in the Tax Year for Business, Commuting, and Personal Driving other than Commuting;
- The First Odometer or the Last Odometer reading of the year;
- The Dates of your Business trips;
- The Address of the Business Location you’ve visited;
- And the Purpose of your Trips (i.e. “House Showing”).
It is important to note that you are obliged to demonstrate to the IRS when submitting the expenses that you have Mileage logs in your possession when taking this deduction.
You have already claimed a Tax Deduction in a previous year and now you are being audited for Mileage?
MileageWise helps customers on a daily basis who are being audited by the IRS (including many Real Estate Agents and Realtors) pass Audits. Our Mileage Logging Software has been designed to meet the strict requirements of the IRS and has been reviewed by IRS audit experts to ensure they are compliant.
If Realtors choose to take the Standard Mileage Deduction they could get a significant amount of money that they have earned by driving for Business.
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