Real Estate Investing

The last time I wrote about taxes, it was on behalf of homeowners.  Today I’m writing it for Realtors with the disclaimer that I am NOT a tax attorney, a tax expert, or an accountant.  What I do have gripped in my hands is a sheet of paper that a fellow agent handed me earlier today from a tax company that lists “Realtor Deductions”.

The sheet says when completing the form, do not include expenses for which you have been reimbursed, expect to be reimbursed, or are reimbursable.  Here are deductions for Realtors:

• Advertising
• Appraisal Fees
• Business Cards
• Bank Charges
• Clerical
• Client Gifts
• Courier Service
• Fees (including commissions paid, escrow/loan fees, and referrals)
• Film/Processing (Really? Do agents still process film?  If you do, go here.)
•  Flowers/cards
• Keys/locksmith
• Lock Boxes
• Map Books
• Office Expense
• Open House
• Rent
• Sales Assistants
• Repairs
• Signs, Flags, Banners
• Food (For open houses, maybe?)
• Software
• Photocopying
• Printing
• Tools
• Stationery

Professionally, agents can deduct dues, Errors & Omissions insurance (E&O), legal fees, licenses, memberships, MLS fees, and publications.  In addition, seminars, continuing education, and resumes are also allowable. The equipment category includes briefcase, calculator, desk, camera, chair, filing cabinet, cell phone, tape recorder, telephone, answering service, long distance faxes, pay phone, and beeper/pager.

Tax time can be very tricky, so when in doubt consult a tax adviser. I save my receipts throughout the year in one big file, but another agent had a better idea than me.  At the end of each month, he filled out his spreadsheet and then stapled all the receipts by month.  When he turned in his paperwork to his tax guy, all the hard work was already done.

Maybe my New Year’s resolution should’ve been organizing my taxes better.

It’s great to deduct the interest of your mortgage payment at tax time!  At other times, it’s pretty hard to swallow what the tax assessor says your home is worth.  I’ve listened to buyers complain that their tax assessment is too high, “What do you mean I have to pay city AND county taxes?” and “This is ridiculous! My home isn’t worth that!”  I’ve also fielded calls from buyers who were irritated because the assessment of their home was too low, “Has my home lost that much value this year?!”  Actually, I’ve had more calls from people upset at lower tax rates because they automatically believe their homes are worth only what the assessor says.  This, of course, is not true… a home is worth what the market dictates it’s worth.

(And I prefer a lower assessment so my taxes won’t be as high.)

Meanwhile, if you’re really unhappy at the government’s interpretation of what your home is worth, you should read this story found in Trulia’s Carnival of Real Estate.  Real estate writer Cliff Jacobson told how to challenge the tax assessor and his story was picked up by the mainstream media.  A reporter contacted him and the resulting story made the front page of the Rochester Democrat and Chronicle.

Cliff did some research on behalf of his fiance’s mother and wrote a helpful piece about how to lower your tax assessment.  His tips include,

One way to have your assessment lowered is to challenge the description and features of your home. Make sure the square footage, lot size, number of bedrooms and bathrooms and garage size are correct. Might the assessor be counting unfinished space in the basement or garage; or improvements you don’t have? Document with pictures when and where possible.

The other tips offered are sensible and smart, so read the whole piece.  He wrote a second piece about the lessons learned from challenging assessments in his own community.  His third piece was about the how his challenge succeeded.  He highlights that in preparation his strategy was:  1) Information 2) Comparables and 3) Condition.

In my own corner of the world, our local county commissioner called me several days ago regarding a discussion on our community blog about tax assessments.  There was confusion that he wanted to clarify so I offered the opportunity for him to submit a guest column about the subject.  He did.

All this talk of tax assessments reminds me of the “How [fill in the blank] views your home” joke.  A sample:

How You View Your Home

How Your Lender Views Your Home

There’s more and it’s funny!