Stop making common tax mistakes that could be costing you thousands in real estate profits every year. Recent guest Diane Gardner, an expert tax coach, helps real estate agents and other entrepreneurs make the most of their profits by filing taxes the smart way. To date, she’s saved her clients over $1 million in taxes.
During her interview with Pat, Diane shared many of the top tax mistakes made by real estate professionals. Keep reading and learn what some of these common mistakes are so you can stop making them and start making more real estate profits. To hear all of the top tax mistakes and some of Diane’s tax-reduction strategies, listen to the complete podcast below.
Failing to Plan Around Expected Real Estate Profits
If you want to take advantage of the best deductions and avoid underpayment penalties, you need to plan ahead. In fact, if you haven’t started planning for your next round of filing, you’re already way behind. At the very least, you should be keeping track of all business-related expenses to maximize your deduction potential.
To avoid the penalty for underpayment of estimated taxes, you should probably be making estimated tax payments throughout the year. Every tax situation is different, so make sure that you understand yours and what your payment responsibilities are so you can avoid wasting money on avoidable fees.
Disregarding the Home Office Deduction
Did you know that you might be able to take the home office deduction even if you work in a real estate office? The trick is that you have to use your home office regularly and exclusively to manage your business. Other business-related activities, like prospecting, don’t have to take place in your home office in order for you to qualify for this deduction.
Here’s why you should try to take this deduction: it can save you a ton on taxes year after year. Not only are you able to write off a portion of your mortgage and utilities with the home office deduction, it cuts down on self-employment and income tax too.
Taking the Wrong Mileage Deduction
When it comes to mileage deductions, you have options. As a busy real estate agent who likely drives to meet clients regularly, you want to make sure you’re choosing the best option for you. You can take the standard mileage allowance, but you can also deduct for actual costs.
The best option for you depends on the type of vehicle you’re driving and how new it is. With newer vehicles, tracking actual operating costs and depreciating the value of the vehicle is generally the best way to save on taxes.
Hiding Real Estate Profits from the IRS
Many real estate agents seem to be afraid of the IRS; you don’t have to be. As long as you’re doing everything thoughtfully and correctly, there’s no reason to worry about your taxes or the IRS.
If you’re trying to hide profits from the IRS, however, you can run into some serious trouble. In case you didn’t already know, you can even wind up in prison for committing tax fraud. It should go without saying, but we’re going to say it anyway–don’t hide your real estate profits from the IRS!
If you want to learn more about how you can pay as little in taxes as legally possible to maximize your real estate profits, be sure to listen to the complete podcast interview with Diane Gardner.
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