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10-23-2009, 01:46 PM
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#1 |
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Registered User
Join Date: Jan 2007
Posts: 1,084
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Real Estate Agent and the Standard Deduction
So, I did the idiotic thing in a down market, and got a real estate license over the summer. As of yet, I haven't made any money from it, and have a bunch of losses -- dues, fees, education, etc. But probably not enough to offset the standard deduction (I have a day job, and a darned good one, too!). So, come tax-time, is there a way to take both the losses from the RE business AND the standard deduction, or do I just go with the standard deduction only?
Thanks!
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"Wealth is the slave of a wise man. The master of a fool." -- Seneca |
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10-27-2009, 04:10 PM
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#2 |
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Registered User
Join Date: May 2007
Posts: 124
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Great question! Yes you can take both:
Your Real Estate business is (by default) a schedule C business. All reasonable business expenses are deductible directly against income - With some statutory exceptions, like meals and country club memberships: The standard deduction represents a personal deduction: Not a business Deduction, so the business doesn't effect your standard deduction: At this point I should stop myself from trying to explain taxes in a way that makes sense. It doesn't make sense at all! It's just a matter of memorizing what's allowed and what isn't. : ) All things being equal, you can take Business deductions against income (or lack thereof), AND you can take the standard deduction. Back to the Real Estate business: If you like people, I think you can be very successful at RE in any market. In addition; you are in an up market now, just after a miserable correction. I really think it only goes up from here. When you start making gads of money, you'll want to be more strategic about your entity choice. Like I said, you are a Schedule C right now, but that's not the best choice for all situations. For more details, check out this article: http://www.grubercompany.com/pages/entityplancpe.asp The article talks about the unique features of each business entity. Different entities are better under different situations, and you switch entities whenever you feel it's cost-effective to do so. This site also provides a number of free tools online: Most of these tools are also available as a single user license - prices for the small business community. Just click the "Free Tools" section on the menu at the top of the page. And please forgive the shameless plug! : ) |
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10-28-2009, 07:33 AM
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#3 |
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Registered User
Join Date: Jan 2007
Posts: 1,084
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Thanks for the reply, Fender!
So, let me make sure I have it. All my income -- personal and business (I'm just an independent contractor at this point) -- goes in one pot, against which I can take both my standard deduction and my business deduction. Do I have it right? -- or is it separate pots (standard deduction against personal income, and business deductions against business income)?
__________________
"Wealth is the slave of a wise man. The master of a fool." -- Seneca |
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10-28-2009, 11:50 AM
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#4 |
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Registered User
Join Date: Mar 2004
Location: New York
Posts: 1,351
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Puck,
Just try to look at the Schedule C for your business as a worksheet full of plusses (income) and minuses (business deductions). Once the Schedule C is complete, you will arrive at a net income/loss derived from your business. This income/loss becomes your gross income on your tax return where a W2 would normally be the source of information, after which you apply your standard deduction. |
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10-29-2009, 12:25 PM
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#5 |
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Registered User
Join Date: May 2007
Posts: 124
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Pricespector is right. The Real Estate business is going to go on a Schedule C. All income and expenses connected with the business will be listed on that form.
It can all get pretty complicated, so you should consult a CPA: IE: Are you using your personal car for business or is a car provided? Are you using an office in the home, is an office provided, or both? Expenses can add up, so you'll need to keep track of them. It would be reasonable to show a loss on your business for the first year or two - Reasonable and deductible against other income on the 1st page of your tax return, like W-2 earnings. |
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10-29-2009, 10:21 PM
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#6 |
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Registered User
Join Date: Feb 2009
Posts: 18
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Real Estate License
Aside from the expenses you incurred being tax deductible, the time may come when you're glad you have that real estate license. If you decide to go into real estate investing, for example, it may prove useful, or when you go to sell your own house, you might save yourself $5,000 on realtor fees.
Or, of course, you may decide to become a real estate agent in a year or two after all! Best of luck, ___________________ Brian Real Estate Forms |
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11-03-2009, 07:29 AM
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#7 |
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Registered User
Join Date: Jan 2007
Posts: 1,084
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Thanks, everyone!
__________________
"Wealth is the slave of a wise man. The master of a fool." -- Seneca |
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