Navigating Tax Season: Bookkeeping Tips for Real Estate Agents and Brokers

As we close out the 2024 annual tax filing season, we recognize how stressful this time of year can be for everyone—regardless of your industry. And for real estate agents and brokers, managing taxes can be particularly daunting. With so many transactions, expenses, and income sources to manage and organize, keeping the books in order can often be a complex and time-consuming task. As a result, it often gets put on the back burner, leading to a more complicated tax filing season. 

When you carefully plan for tax considerations throughout the year, tax season becomes much more manageable, and your real estate business will also run smoother. Let’s explore some of the best ways to manage your finances throughout the year to help make tax season—and quarterly tax responsibilities—more efficient and less stressful as a real estate professional.

Best Practices for Bookkeeping for Real Estate Agents and Brokers

There are many ways to ease the burden of tax season for your real estate business. Here are a few of our top tips:

Maintain Separate Bank/Credit Card Accounts

Mixing business and personal financials can get complicated quickly; we don’t recommend it. It’s best to set up dedicated bank accounts and credit cards for your real estate business that are completely separate from your personal accounts so you can track income and expenses more accurately. This clear separation helps streamline your bookkeeping process and ensures you have a clean record of your business transactions. You will thank yourself come tax season!

Track Expenses and Save Your Receipts

It’s essential to save receipts for all expenses related to your real estate business, even if they seem small or insignificant; it adds up! Don’t leave anything off the list from office supplies to mileage for travel to and from client meetings to digital marketing tools and more. The more detailed your expense records are, the easier it will be for you to claim deductions and minimize tax liability. Consider using digital tools or apps that help you capture and organize receipts more efficiently. Additionally, there are often features within these tools to help you categorize expenses, so you can analyze your spending patterns and potentially identify areas to optimize costs in the future.

Look at the Big Picture

While managing your real estate business finances, don’t overlook the broader financial landscape, including your business and personal life events. Many of life’s biggest events are also taxable, which can impact your tax situation as a real estate professional. If you plan to make significant financial decisions in a specific year, consider how these actions may affect your tax obligations and overall financial strategy. For example, you may be considering buying or selling property, getting married, or having children, which can affect your tax liabilities.

Stay Organized Throughout the Year

Effective bookkeeping is not just something to think about during tax season—it’s a year-round commitment. Be proactive and start the year by committing to setting up systems for keeping tax records organized all year. Having a system can help you stay organized and consistent with your financial records, saving time and stress when it comes time to file your annual taxes. Implement consistent routines for data entry, reconciling accounts, and reviewing financial reports to ensure your books remain accurate and current.

Track Income and Compare Records to 1099s

As a real estate professional, you likely receive income from various sources, including commissions, referral fees, and rental income. It’s important to track all sources of income closely throughout the year. When tax season arrives, compare your records to the 1099 forms you receive from clients or brokerage firms to ensure accuracy. Address any discrepancies promptly to avoid potential issues with the IRS.

Utilize Accounting Software or Hire a Professional

Investing in the right accounting software for your real estate business can help streamline your bookkeeping process significantly. Find one that works for you and includes helpful features like expense tracking, income categorization, and tax preparation assistance. If managing your finances becomes overwhelming, hiring a professional accountant or bookkeeper specializing in real estate can provide invaluable support and peace of mind during tax season—and all year long.

Let Cents and Balance Handle Your Books

Navigating tax season as a real estate agent or broker requires organization, attention to detail, and consistency. By following these bookkeeping tips and incorporating these best practices into your financial management routine, you can streamline the tax filing process, maximize deductions, and stay compliant with regulations. 

If you need help keeping your finances organized so you’re fully ready for tax season each year, Cents and Balance can help. Contact us today to get started.