1. Real Estate Agents 2017 Tax Year
How to save on TAXES
Real Estate Agents
2017 Tax Year

2. 1
INTRODUCTION 2
THE REAL ESTATE INDUSTRY 3
TAX PLANNING 4
S-CORP 5
DEDUCTIONS / EXPENSES

3. Introduction B.J. Cottrell Jr., EA, CAA
Partner – Cottrell Tax & Accounting, LLC
Founder – Tax Training & Tutorials, LLC
Affiliate Member of NABOR
Previously on Budget & Finance Committee
Currently on Global Committee
Enrolled Agent (EA) - Licensed by the U.S. Department of the Treasury to represent taxpayers before all administrative levels of the Internal Revenue Service (IRS), including examination, collection and appeals functions.
Certified Acceptance Agent (CAA) – Authorized by the IRS to authenticate passports for foreign Individual Taxpayer Identification Number (ITIN) applications. Needed for all FIRPTA transactions.

4. The Real Estate Industry
The Real Estate industry is unique in two major ways.
One … your income can drastically change from year to year.
Two … you get paid with a 1099, subjecting your net income to 15.3 % self-employment tax, on top of your income tax bracket.
Additional 15.3% Self Employment
Tax on all
Net Income
1099
Income
Fluctuation
Unique 2 Ways
25%
Income Tax
15.3%
_____
SE Tax
Large Closing
Economy
Personal Life
12/31 vs. 01/01
40.3%
Total Tax

5. Income Fluctuation We attack the income fluctuation with TAX PLANNING.
We meet with every one of our realtors in late October / early November to review their income and expenses for the year. This is a free service we provide for all of our realtor clients.
We do it at the end of the year so we have accurate numbers for most of the year and can more accurately project the last few months.
Then we have time to make changes:
adjust payroll
make estimated tax payments
suggest extra expenses
make large purchases
setup and contribute to retirement
and many more
If you wait until the year is over,
it’s too late.
Month
Dollars

6. S-Corp 1099 Owner Worker 1099 & Self Employment Tax
We deal with this by setting up an S-Corp. This allows us to limit the amount of self-employment you have to pay each year.
We are able to do this by paying some of your net income through payroll (subjected to SE tax) and the rest in distributions not subjected to SE tax.
This way you wear two hats:
Owner – K1 not subjected to SE tax
Worker – subjected to payroll tax (W-2)
S-Corp
Owner
Worker

7. PA LLC PL / PLLC S-Corp Corporation S-Corp Single Member LLC
STATE
Florida Department of Regulations PA
LLC
PL / PLLC
FEDERAL
IRS -Tax Return
Corporation
S-Corp
Single Member LLC
Partnership
S-Corp
Single Member LLC
Partnership
S-Corp
We suggest that a Real Estate Agent be either a
Single Member LLC or an S-Corp for tax purposes.
Therefore, the LLC, PL, or PLLC is the best option, because it allows you to be either a Single Member LLC or an S-Corp.
NOTE: an election is needed for any of the entities to be taxed as an S-Corp.

8. S-Corp How it Works Need to Set Up Company With State of Florida
Need to Change Your RE License – Form # DBPR RE 16
S-Corp Election
Separate Bank Account and Records
Separate Tax Return (1120S) – K1 flows to individual return
Payroll For All Workers – “Fair and Reasonable Salary”

9. S-Corp vs. Individual (1040)
Total Income
$ ,000
$ ,000
Total Expenses
$ ,000
Net Profit Before Salary
$ ,000
Salary $
Taxes
Income
Same
Self Employment Tax $
$ ,300
FICA Employment Taxes
$ ,650
Florida Unemployment $
Federal Unemployment $
Cost
Annual Filing $ $
Tax Return Preparation $ $
Payroll Preparation $
Total Taxes and Cost
$ ,583
$ ,600
S-Corp Tax Savings
$ ,017

10. Deductions / Expenses Retirement Planning – 2017
Individual (1040) & S-Corp (1120S)
Traditional or Roth IRA - $5,500 ($6,500 > 50)
Simple IRA – $12,500 ($15,500 > 50)
SEP – 25% of compensation / Max $54,000
S-Corp (1120S) ONLY
Solo 401(k) – Elective Deferral $18,000 ($24,000 > 50) (W-2)
25% of Compensation
Max $54,000

11. Deductions / Expenses Accounting & Tax Prep Advertising
Newspapers - Giveaway Items
General Magazine - Business Cards
Proprietary Magazines - Signs
Radio Flyers
TV Direct Mail
Billboard Telemarketing
Internet Number
Internet Design Work - Web Site Maintenance Fee
Home page, access, fees - Advertising - Other

12. Deductions / Expenses Automobile Mileage Actual Automobile Expenses
Need to keep a log of all miles
IRS has accepted a 3 month average in certain cases
Make sure to get service done on your automobile at the beginning of every year so you have a starting and ending mileage
_____ Total Business Miles (Standard rate 2017 = $ per mile)
_____ Total Miles
Actual Automobile Expenses
Includes
Fuel
Repairs – Oil Changes, tires, other repairs
Insurance
Vehicle registration, license
Vehicle lease or rental fees

13. Deductions / Expenses Bank Charges
Charitable Contributions (Deductible on Personal Return)
Clothes / Uniforms
Uniforms only !
Computer Expenses
Contract Labor
Technology Support
Coach
Copies
Credit Reports
Customer Gifts
$25 per person
($50 per couple)

14. Deductions / Expenses Continuing Education Dues Equipment Home Office
Books
Newsletters
Tapes / CDs
Seminars
Magazine Subscriptions
Dues
MLS
NABOR
Board of Realtors
Other
Equipment
Copier
Fax
Computer
Cell Phone
Interest / Finance Charges
Home Office
NEW Simplified Option
($15 p/sf -- $1,500 Max)
Can not take if S-Corp
Insurance
E&O
Insurance – Health
Property - Office

15. Deductions / Expenses Legal Meals & Entertainment (50% deduction)
SUPRA Keys
Office Supplies
Paper
Ink & Cartridges
Photography
Postage/Freight/Delivery
Printing (Non-advertising)
Professional Fees
Rent – Office
Repairs & Maintenance
Office
Janitorial & Cleaning
Computers
Copier
Payroll Expenses
Staff (Gross Pay)
Telecommunications
Phone Line
Cell Phone
Answering Service
Internet Line

16. Deductions / Expenses Utilities – Office Selling Expenses - Staging
Taxes
Payroll (FICA)
Payroll (FUTA)
Payroll (SUTA)
Property Taxes - Office
Annual Report
Travel & Entertainment & Lodging
Airfare
Bus & Subway
Bridge & Highway Tolls
Car Rental
Laundry
Lodging (do not combine with meals)
Meals (do not combine with lodging)
Parking
Taxi
Telephone & Fax Charges
Train
Other

17. Deductions / Expenses
Hire your children. If you need help in your business, consider hiring your children. The wages you pay will be deductible by you and taxable to your children in their presumably lower tax brackets. Wages paid to your children under age 18 are not subject to payroll taxes unless you operate a corporation.
Hire your spouse. You can write off more expenses like cell phone, his or her computer, and more. Also, if your spouse accompanies you on a business trip for a valid business purposes, you can deduct his or her expenses along with your own. You may be able to set up retirement plans as well for your spouse.

18. Thank You! BJ Cottrell, EA, CAA Cottrell Tax & Accounting, LLC
5147 Castello Drive | Naples, FL 34103
ph:  | fax: