Top 10 FAQs For Real Estate Agents – Can I Write Off My Home Office

Andrea Dillon, CPA, CTRS Real Estate Professionals

Can I write off my home office?

One of the (obviously) super common everyday norm’s for a real estate agent (even before the Covid world changed) is the ability to work wherever and whenever you like. So, naturally, the next question we get is agents asking if they are allowed to write off their home office. The answer? It depends.

IRS rules on home offices are very clear. First and foremost, you cannot have a space provided to you. So take me, I have a beautiful (if I do say so myself) office within my physical office location. If someone else is sitting there I could theoretically make them move (politely, of course) because it’s MY office. This immediately kicks me out of being able to claim any of my home expenses for working remotely (which I do) because I am choosing to work remotely for my convenience, there is an office provided to me that is exclusively mine. This is typically an easy one for agents to overcome as you typically do not have an office space exclusively provided to you. You may have a communal workspace provided by your broker, typically on a first come first serve basis, but if today is the day that every agent decides to hit the office, you would be out of luck. If this is you- you meet the requirement just discussed. Now watch out for what you are paying for- some brokers offer a desk rental fee to their agents guaranteeing them a workspace, this may knock you out (because no you ARE guaranteed one).

Next step- you must have space specifically designated for business. It can’t be your dining room table or your couch in the living room- however, it also does not have to be an entire room designated either. The home office write-off works off square feet, so if your guest room does double duty as your office but also has a bed in it for overnight guests, as long as you are only including the square feet of the area for your office, you are ok. As soon as you include the guest living quarters square feet, you broke the rule. Work “areas” definitely count if you do not have a physical, drywalled-in, office. Assuming you DO meet this rule and you DO have a work office/space that is exclusively for you to work in…. you have a home office!

This will then allow you to take a percent of your home expenses, as they relate to the area of your home that is your office. So, if your office area is 7% of your home, you would (hypothetically) be able to write off 7% of your home expenses. This would include items such as your rent, mortgage interest, property taxes, homeowner’s insurance, flood insurance, utilities, etc. Anything you pay that is required for the use of your home (that contains your office) is worth discussing. Things to shy away from pool maintenance and landscaping fees. This is typically not a large deduction (if it is large expect an audit), but it may be something you are entitled to. Also, keep in mind there IS a safe harbor for his of $5 per (office) square feet, with maximums on this, but please talk to your tax professional to see which would work best for you.