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Tax Deductions for Real Estate Agents in GTA, Canada

Toronto has a lot of real estate agents (mostly part timers, self-employed). Most of them will be confused about filing their taxes. The biggest question is, what expenses can a realtor claim as tax deductions in Canada? Here's a list to help you out.
Tax Deductions for Real Estate Agents in GTA, Canada

What expenses can real estate agents deduct as tax deductions?

There are a lot of people who are connected to the real estate industry, especially for tax deductions. This post is focused on real estate agents (also known as realtors). In my observation, this is one of the most sought-after professions people take up as part-time, and why not, it makes a lot of sense, especially in the Toronto GTA market.

I always tell my realtor (full-time or part-time) clients, that they have to look at themselves as businesses. Self-employed means business! it brings some important administrative responsibilities on your shoulders, like bookkeeping, keeping receipts, keeping records straight, proper banking, etc.

OK coming to the point, we have (literally) made a detailed list of expenses that real estate agents (or realtors) can claim as tax deductions. So, let’s begin tax savings.

(Please note the lists of expenses mentioned below are not exhaustive, a lot depends on the individual business situation)

Asset Purchases (or bigger purchases)

Depending on your business volume (or size), you might have made purchases that are bigger (or material) in value. Such as the following:

  • Furniture and fixtures
  • Computers, photocopiers, fax machine
  • Microwave, coffee maker, etc.

There are two options on how to report these kinds of purchases.

Expense out; you can claim all the amount of the item purchased as a business expense in the current year.

Amortize; you can claim depreciation of the asset over a period of multiple years. CCA class rules will apply.

Communications

Real estate agents depend a lot on telephonic and other means of communication. You can claim the business portion of all communications-related expenses. Following is a list of deductible expenses under this category:

  • Landlines cost
  • Cell phones bills
  • Any dedicated numbers like 0800 etc.
  • IP phones
  • Subscription for Skype, Zoom, Goto meeting, or any other virtual meeting tools

Meals and entertainment

Real estate agency involves social interactions. Where there are social interactions, there has to be food and restaurants 😊 Realtors are quite often heavy on meals and entertainment-related expenses. The rule of thumb here is that the expense is allowable if it is incurred solely for business (operations and development). You can claim half (50%) of such expenses. So, if you have to pay for taking a client to lunch, hosting a networking event, buying sandwiches for business meetups, eating on the fly, buying an event ticket for a client, etc. Yes, you can claim deductions under the meals and entertainment.  

Gifts to clients may fall into a different category. Briefly, gifts are allowable expenses as long as they satisfy the purpose of a business. You may claim gifts under meals and entertainment (half value) or marketing and promotional expenses (full value). In any case, keep a complete record of the transactions.

Education

You might have had spent money on getting an education to become a real estate agent. You might need to get more education to improve your professional education and knowledge. The money you spent on education that helps in developing and improving your profession is a tax-deductible expense.

For these education amounts, you may claim as a tuition credit (if applicable) on your income tax return (in Schedule 11), or you may claim the amount as an expense (on T2125). It depends on what is applicable and more tax beneficial.

Question: A realtor took an online course on online advertising, is this an allowable expense?

The answer is yes. If you took a course that helped in improving your business income, you can deduct the cost of that course. Such a course can be taken as a marketing expense too.

Vehicle and transportation

Mileage

All miles traveled for your real estate business are deductible. So, you used your car for any showings, open houses, closings, or other business-related meetings – all those accumulated miles qualify as tax deductions.

If you are using your personal car, I will recommend you maintain a good track of mileage for business and personal use. You can do that manually (yes, it will be hectic!) or there are some nice apps on the market.

Since all your car-related expenses will be split into business and personal portions. You will only claim the business portion of the car expenses as tax deductions. Generally, the following vehicle-related expenses can be claimed:

  • Gas
  • Maintenance (oil changes, repairs, winter tires, etc.)
  • Insurance
  • License and registrations (license plate renewals, registration, etc.)
  • If the vehicle is financed (owned), depreciation and the interest cost on the finance
  • If the vehicle is leased, the amount of lease paid
  • Car washes, accessories
  • Parking and tolls

Home Office

Most realtors (especially part-timers) use their homes as offices. This gives you the opportunity to claim business use of home expenses. You will have to determine the percentage of business use of the home (similar to the business use of a vehicle). This will generally be based on the space usage (in square feet). Business percentage of the following expenses can be claimed in this regard:

  • Heat
  • Electricity
  • Insurance
  • Maintenance
  • Interest on mortgage
  • Property taxes
  • Internet

Marketing

Marketing is quite a broad term, for realtors, it literally is. For real estate, agent marketing may include a variety of activities and items. You will have to use your discretion; the rule of thumb is that the expense has to help improve your sales. The list below is not exhaustive, also, we have put the advertising and marketing under one banner:

  • Digital advertising; Google Adwords, Facebook ads
  • Marketing materials; lawn signs, handouts
  • Listing on various online and offline publications
  • Networking events
  • Goodies for open houses, staging
  • Payments for managing a blog, social media presence, or Youtube channel
  • Photography, virtual tours, 3D tours
  • Payment to online influencers, bloggers, etc.
  • Lead generation

Technology

Like most other self-employed people these days, realtors to have to use many applications and software to be effective in their business. As a rule of thumb, all technology costs that are incurred for business purposes are deductible expenses. Here are some technology-related expenses:

  • Website; domain, hosting, maintenance, emails
  • CRM (customer relationship management) solutions
  • Bookkeeping solutions like instaccountant mobile app, Quickbooks Online, Freshbooks, etc.

By the way, if you need professional bookkeeping or software setup or implementation solutions, we can help you.

  • Vehicle mileage tracking apps
  • General software: Microsoft Office, Skype, etc.

Professional fees

Real estate agents have profession-related expenses that are fully deductible. These may include the following:

  • Professional membership fees or dues, like CREA (Canadian Real Estate Association), OREA (Ontario Real Estate Association), TREB (Toronto Real Estate Board) dues
  • Desk fees
  • License renewal fees
  • Commission paid to third parties
  • Listing fees
  • MLS fees

Other expenses

Real estate agents can claim all other expenses of generic nature like any other business:

  • Office maintenance expenses like cleaning, heating, utilities
  • Supplies like stationery, printing paper
  • Any business insurance
  • Office lease or rental
  • Bank charges

As a general tip, always keep receipts and trail of expenses safe and organized. It really helps! You are required by CRA to keep receipts for six years.

So, that’s quite a detailed list and explanation of expenses that real estate agents can claim as tax deductions. Please let us know if you have any questions or feedback in your comments below

 

Disclaimer: This is a general explanation and should be used only for informative and understanding purposes. This article cannot be used or referenced for legal or tax purposes. Every tax situation is different. You should consult a lawyer or accountant to understand applications in a particular tax situation.

 

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