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Why Real Estate Agents Should Track Their Miles
Agents who use mileage tracking apps can benefit from more than just tax deductions
A real estate agent’s working life involves a lot of travel. Agents visit properties to refill flyers, preview communities, conduct open houses, and make multiple trips for showings with buyers before closing a deal. Additionally, agents also attend meetings with current and prospective clients throughout the week.
As most agents are self employed, they put wear and tear on their own vehicles and cover the cost of gas and maintenance themselves. To help cover this expense, real estate agents can claim a mileage deduction when they file their taxes.
Mileage tracking may sound like tedious record keeping, but technology’s made it easy for agents to maintain an archive of miles driven. Mileage tracking apps should be used by every agent to help them claim a deduction that minimizes personal expenses accrued from business miles.
The two ways to claim a mileage tax deduction
There are two ways an agent can calculate their work-related vehicle costs: standard mileage rate and actual expense.
To know which deduction is best, an agent should calculate both and see which one gives them the biggest tax deduction. This should be completed every year as some years actual expenses will produce a larger tax deduction and other times the standard mileage deduction will be more beneficial.
1) Standard mileage rate
The standard mileage rate hinges on the yearly rate set forth by the IRS. For 2021, the IRS allows a 56 cents claim per business mile driven. That means that for every 1000 miles driven, $560 can be deducted from an agent’s taxable income.
The standard mileage rate deduction usually produces the greatest tax benefit for agents who drive 10,000 business-related miles or more annually and is a straightforward and easy way to save money during tax season.
2) Actual expense
The actual expense deduction is typically best for agents that have high car payments or drive less than 10,000 miles per year. Calculating an actual expense deduction is slightly more complicated than standard mileage rate because it requires agents to figure out all the money they’ve spent in order to operate their vehicle for work purposes.
While this is not a comprehensive list, some actual expense costs an agent can include are:
- Lease payments
- Oil changes
- Tire rotations
- Auto insurance
- Title, licensing, and registration fees
- Vehicle depreciation
- Brake pad replacements
- Other various maintenance work
Once these costs are added together, an agent must decide the percent of time they use their car for work vs personal use. That percentage is then multiplied by the total amount spent on operating their vehicle.
Read more about how to perform this calculation on Turbotax.com.
It’s important to note that the IRS requires proof of receipts, mileage logs, and other documentation for anything used when determining deductions.
Keeping an organized record of expenses can be challenging, especially for the actual expense method. But mileage tracking apps help make claiming a deduction much easier.
Best app for mileage tracking
There are many mileage tracking apps available to choose from. Due to this, agents should select an app that also serves to help them close more deals and build better agent-client relationships, like Beans Tour.
Beans Tour is a new app that was created for both agent and client use. Agents are able to use the app to manage clients, view client notes, schedule showings, see listings, track mileage, and organize their calendar all in one app. Clients who use Beans Tour can take notes, store photos, and write specific feedback about properties. All this information is made available in real time to their agent to help them better predict the types of properties their clients are seeking.
Beans Tour also provides users access to millions of apartment maps across the U.S. and will navigate both agents and clients to within 10ft of a showing’s front door. Navigation to precise locations of the listing, amenities, and other key points of interests reduces the amount of time clients waste when visiting a complex. The app also highlights the best place to park and enter a complex in order to reach a particular unit in the shortest amount of time.
For more information about Beans Tour, please visit www.beanstour.com or download the app with the appropriate link below.