There are plenty of ‘tax tips’ articles out there for real estate agents. However, most of these articles provide nothing more than a general, overall understanding of what expense categories are considered eligible for federal tax deductions. This article will attempt to help conceptualize what types of real-life advertising and marketing expenses can be eligible for tax deductions under federal law. However, this is an overview, and should not be considered a substitute for sound, personalized advice from a tax professional. Also, this primer does not provide legal advice–you need to take steps to ensure that your advertising campaigns comply with applicable federal, state, and local regulations.
Common Advertising & Marketing Expenses
With that said, let’s look at common advertising and marketing expenses that real estate agents can claim as tax deductions. There may be other expenses not listed here that can be deductible as another type of expense (such as entertainment, or office expenses).
Billboards and signage: Pretty common expense, and tax deductible.
Brochures, flyers & pamphlets: You’ll hand these out like candy for every listing. Just remember that not only are these deductible, but the disposable containers that you put in a front yard for listings are also deductible.
Mailers: You don’t hand these out, but mailers are a convenient way to get your listings or credentials in front of a targeted audience.
Online ad campaigns: Online advertising, through Google, LinkedIn, and Facebook, are a very common way to get your name in front of prospective clients. Especially in today’s world, in which you’re almost always evaluated online before you’re evaluated in person, it’s important to get your name & profile in front of as many online searchers as possible. Fortunately, online ad campaigns are deductible advertisement expenses.
Email lists or mailing lists: If you purchase or subscribe to contacts lists, these expenses can be eligible for deductions.
Website: Hosting fees and cost of domain name. Website design and setup can also be deducted, but expensive sites may have to be depreciated over three years.
Stock photos used for website. A common accompaniment to websites, a stock photo subscription service, or individual photos used to help spruce up your website is a tax-deductible expense.
Promotions: Sponsoring your local little league baseball team or PTA can be deducted as long as there is a clear connection between the sponsorship and your business. Similarly, an advertising campaign encouraging people to contribute to the Red Cross, or other well-known charitable cause, is deductible as an advertising & marketing expense, if it relates to business you reasonably expect to obtain in the future.
Paid advertisements: If you take out an ad in the local paper, this is a deductible expense. Even if it’s a half-paid advertisement in a local church flyer, this would be deductible under advertisements, not under charitable contributions.
Newsletter: Don’t want to take out an ad in the local paper? Create one of your own. For as little as $500, you can create your own print or online newsletter & obtain prewritten real estate articles from a company such as ProCalibre Associates Inc., a real estate marketing company, to educate your audience. From there, you can add some notes about your own listings as well as recent sales prices in surrounding neighborhoods. It’s deductible.
Business cards: As a real estate agent, business cards are essential. Even when you hand them to a person whom you do not expect to become a client, your business cards are a way of advertising how you do business.
So, what other marketing or advertising expenses do you see out there? Feel free to leave a comment below. Do you have any questions about what is deductible and what is not? If so, please feel free to shoot me an email to me at: firstname.lastname@example.org and I’d be more than happy to research it for you.