The IRS doesn’t publicize the average expense that realtors claim for mileage when using a personal vehicle for work purposes. However, the average business miles driven per year that a realtor claims a deduction for will depend on the method they use for calculating the deduction and the number of apartments and houses they show each day. But it is worth noting that lying about mileage on taxes is never a good idea.
Car Deduction Overview
If you operate your own real estate business or provide realtor services as an independent contractor for an agency, you are eligible to claim a deduction every time you use your personal vehicle.
The reason for the deduction is because the IRS views the use of your car as a business expense. The tax-deductible mileage for real estate agents is usually as a result of most of the driving you do to take prospective buyers and renters to view properties.
Additionally, any time you spend when driving to view new properties that come on the market or to even pick up office supplies, can be included in your taxes. The IRS gives you two options for calculating your annual deduction.
However, if you are an employee who uses your car for business-related activities, you cannot claim an employee business expense deduction for doing so. Further, this rule still applies even if your employer does not reimburse you for the costs you incur when you use your personal vehicle.
Tracking Actual Costs
One method of calculating the average realtor mileage deduction is known as the actual expenses method. You can implement this method by keeping track of every dollar you spend on your car that relates to your profession as a realtor.
For example, you can deduct the actual cost of gas every time you go to the pump, the cost of oil, repairs, auto insurance and even some of the lease payments you make on the car. If you purchase the car, the IRS allows you to claim a depreciation deduction instead.
However, just because you can include these expenses doesn’t mean they are 100-percent deductible. Since you use the car for personal use too, you must allocate your total car expenses between your deductible realtor use and non-deductible personal use.
One easy way to make this allocation is by keeping track of the miles you drive for work. You can calculate the percentage of your deductible car expenses using the ratio of miles you drive for the real estate business to the total miles you put on the vehicle. And then, you can use that percentage to calculate the business portion of your car expenses.
Deducting Your Standard Mileage
The IRS provides realtors with another easier way to calculate their deductible car expenses. It is known as the standard mileage rate method. The rate is fixed at the beginning of each tax year, and in a sense, estimates the average cost you will incur for each mile you drive.
To calculate your deduction, you simply multiply the mileage rate by the number of miles you drive for your real estate position. You are also free to calculate your mileage deduction using both methods and choosing the one that yields the higher deduction.
Reporting Realtor Mileage
The deduction calculation is the same for all taxpayers. If you are an employee of a real estate firm, you cannot claim the mileage deduction for realtors. However, if you are an independent contractor or operate a real estate business as a sole proprietor, you can claim all mileage expenses.
Also, if you are an employee but have a business on the side, you can claim deductions for the portion of the time you use your vehicle to operate your business. Tax reporting involving mileage deductions is usually done on a Schedule C attachment of Form 1040.
Read More: Is Tax on Buying a New Car Tax Deductible?
Jeff Franco's professional writing career began in 2010. With expertise in federal taxation, law and accounting, he has published articles in various online publications. Franco holds a Master of Business Administration in accounting and a Master of Science in taxation from Fordham University. He also holds a Juris Doctor from Brooklyn Law School.