Best Tax Software for Real Estate Agents - Everything You Need to Know

8 Min Read

Scope of Work

Taxes

Tools

Tom Smery

Tom Smery is a certified CPA for over a decade. In his free time, he writes articles to pass on his expert knowledge on taxes and accounting. Thomas has a wide range of deep knowledge on 1099 taxes, and finance topics. You can find him fishing when he is not preparing taxes for his clients or writing about accounting.

As a realtor, you must carefully pick the best tax software for real estate agents. Yes, even if you work in real estate, you still need to make your payments to the state.

After all, like every job, real estate might require some business expenses - for which you may be able to get a return on your taxes.

You just need to make the calculations using the right accounting software, and the information in this article will help you in this regard.

Note: if you want to save money on your taxes, try Bonsai Tax. Our tax software will scan your bank/credit card statements to discover potential deductions you can take advantage of and save you thousands of dollars. Real estate agents who use our software save, on average, $5,600. Claim your 14-day free trial here.

Broker Accounting Software vs. CRM

Real estate agents have two types of accounting software when it comes to keeping track of their small business expenses.

In many cases, the income and expenses can be tracked on both mobile apps and desktop platforms. The best software will have both, but you might still want to do a thorough check on its features.

Brokerage Accounting Software

Brokerage software is often available on both desktop platforms and mobile versions. In most cases, it is free of charge and requires a subscription-only when you want to get access to high-end features.

Generally, brokerage software includes accounting, compliance tracking, financial planning tools and commission management.

It is a good option for a small business that does not have a payroll, but it's also great for those who are looking to save money.

Here are some apps that a real estate small business often uses for its accounting and track record:

Bonsai

Bonsai is the best option for realtors to track their tax deductions. From advertising to mileage, phone, and desk fees, the app is popular as it removes the need for entries.

It simply needs to be connected to the credit card, and the data transfer is automated. Also, there are multiple free features that you can use (like their tax calculator for freelancers as well as their mileage template)

Note: If you want to track all your tax deductions and save thousands of dollars during tax time, try Bonsai Tax. Our app can automatically discover potential tax write-offs by scanning your credit card/bank receipts and record your deductions. Users typically save $5,600 by using our software. Try a 14-day free trial now.

BackAgent

Featuring brokerage intranet and transaction management, this accounting software can track all the expenses you make from your business credit card and more. The setup is free, but you'll have to pay different fees depending on the tools that you need.

BrokerMint

If you want some simple accounting software that won't take too much of your budget, you may use BrokerMint. It tracks your expenses in an easy manner, and it also features a user-friendly online platform.

BrokerWOLF

Also known as Lone Wolf Back Office, this accounting software is a good option to track your credit card transactions, license, trust accounts, payroll tools, and many more. Upon tax time, you will have all the data necessary to get your deductions.

Other options

Other good accounting software options are Brokersumo, Moxiworks, or Paperless Pipeline. The choice depends on your preferences, more often than not.

Platforms and CRMs

Platforms and CRMs are also good options to keep track of your transactions and commissions. CRMs also have accounting and management tools, so some of these pieces of software can actually help users in their deduction calculations.

Best Real Estate Accounting Software Features

When looking for real estate accounting software types, you might want to consider comparing multiple options first. Get the top three and compare their expense tracking feature with one another.

For instance, some pieces of software will allow you to handle your P&L (Profit and Loss Statement). Sometimes you may want to work with an accountant vs a tax software to help you.

This expense tracker enables you to save your receipts and justify your expenses in case the IRS gets curious about your work. Keeping track of these will avoid trouble.

If you have a larger operation - for example, one that involves teamwork, then you'll want to go for a slightly more sophisticated accounting program. The more features you can snatch, the better.

Features You Should Look For

Depending on what kind of realtor you are, you might not need all the features that the accounting software might put on your plate. Still, here are some of the features that you must look for:

W2 Payroll
Tax Preparation
Invoicing
Cloud-Based vs. Offline
Easy-Exported Data

Other than that, search for features that you believe would help your real estate business the most. Some may even be given for free. Nevertheless, make sure the above-mentioned ones are part of the package.

How Much Should a Real Estate Agent Save for Taxes?

Realtors should pay the current self-employment tax rate alongside their taxes for income and expenses.

At the moment, the self-employment IRS rate is a total of 15.3%. From that amount, 12.4% goes to social security, whereas the rest of 2.9% goes into Medicare.

The above only applies to income that goes as high as $128,400. If the income goes above that amount, then you'll still have to pay that amount for Medicare, then you won't need to input that extra amount for social security.

Adding the self-employment payment together with your income taxes, it's safe to assume that you should put aside around 30% of your income for taxes (although the amount may vary from state to state). Make sure you familiarize yourself with your region's law.

How Do Real Estate Agents Do Taxes?

Realtors are usually independent contractors, which means that their payment is not withheld automatically by the broker they are collaborating with.

When tax season turns a corner, they will have to handle their payments just like a self-employed person would.

What Form Should They Use?

All real estate agents that make more than $600 per year need to handle their expenses just like any other person would have to. Use the accounting software to keep track of your receipts, and when the year comes to an end, you have to file for returns to the IRS.

This can be done by using form 1099-MISC. You can send the file to the IRS, along with a copy of the form to the agent you are working with.

You may also allow the IRS to calculate the taxes for you, but the accounting software of your choice should help you in this regard.

What Expenses Can Real Estate Agents Claim?

When you work in real estate, there are several tax deductions that you may claim. These are:

Paid Commissions

It might seem like a surprise for you, but if you pay commissions to another business that is working with or for you, then you may get a deduction for those commissions. Keep track of each commission cost in your QuickBooks and get your returns on tax time.

Desk Fees

You may be working as an independent broker, or you may be collaborating with a franchise. No matter the case, you are eligible for deducting your desk fees. Just bear in mind that you won't be able to deduct fees for home offices.

Home Office

As a self-employed person, you will likely have to conduct a part of your business at home - and to be able to deduct those business expenses, you'll need to have an actual office in your house. And unless you are deducting desk fees, you are more than likely eligible to claim home office deduction.

Track your write-offs using Bonsai's free home office excel sheet.

Bear in mind that for these deductions to apply during tax time, the office must be used exclusively for work purposes. This means you won't be able to deduct a bed or a kitchen table as a business expense.

Education and Training

The industry changes at a very rapid rate, which is why self-improvement is often necessary.

If you are taking training or education to remain competitive, you may be able to deduct the payment. The condition is that the courses must be used only for that business or trade.

Advertising and Marketing

Marketing and advertising are far from free, but you may deduct them as well. As long as you take advantage of a tracking app, you may get your tax money back.

Equipment and Office Supplies

You may be working with your clients on the field, but that does not mean you won't have to pay for office supplies. Every real estate agent will handle paperwork.

To make things easier, make the purchases using a business credit card. After that, connect the card to the accounting software. You can either use one of the above, or you may find other free options on your app store.

Other Expenses

Besides the expenses above, you can also claim tax deductions on:

Meals

As long as the meals are for business purposes, you may deduct them as a business-related expense. You may not be able to eat for free, but you should at least be able to get 50% off.

Business Tools and Software

Ironically, if the business tool or software you use is not free, then you may be able to claim deductions from it. You should try to claim these costs, as software is essential in tracking the expenses. But you can claim a deduction for software that is paid.

Insurance

Many real estate agents invest a lot of money every year in insurance. Luckily for them, this can be deducted as well. Unlike meals, insurance is fully deductible.

Can Real Estate Agents Write Off Car Payments?

As a broker, you may be able to write off some of your car payments. While you may not be able to write off the full costs of buying a car, you may write off other expenses that benefit the business. This may include mileage, car washes, repairs, and so on.

The Bottom Line

Accounting software can offer you a lot of support if you work in real estate. And the best part is that even if the program is not completely free, you may deduct it as well. Just make sure to track your expenses accordingly and file for your returns by the end of the tax year.

What Defines a Verbal Contract?

A verbal contract (formally called an oral contract) refers to an agreement between two parties that's made —you guessed it— verbally.

Formal contracts, like those between an employee and an employer, are typically written down. However, some professional transactions take place based on verbally agreed terms.

Freelancers are a good example of this. Often, freelancers will take on projects having agreed on the terms and payment via the phone, or an email. Unfortunately, sometimes clients don't pull through on their agreements, and hardworking freelancers can find themselves out of pocket and wondering whether a legal battle is worth all the hassle.

The main differences between written and oral contracts are that the former is signed and documented, whereas the latter is solely attributed to verbal communication.

Verbal contracts are a bit of a gray area for most people unfamiliar with contract law —which is most of us, right?— due to the fact that there's no physical evidence to support the claims made by the implemented parties.

When is a Verbal Agreement Legally Binding?

For any contract (written or verbal) to be binding, there are four major elements which need to be in place. The crucial elements of a contract are as follows:

Offer and acceptance: An offer is made and accepted by another party involved in the agreement;
Consideration: The involved parties must exchange something of value (money, a service, time, etc), this is known as consideration;
Intention and certainty: All parties must fully understand the terms of the contract and intend to make a legally binding agreement freely; and
Capacity: The parties must have the capacity to legally enter into the contract; they're above age and of a stable mindset.

Therefore, an oral agreement has legal validity if all of these elements are present. However, verbal contracts can be difficult to enforce in a court of law. In the next section, we take a look at how oral agreements hold up in court.

How strong is a verbal agreement in court?

Most business professionals are wary of entering into contracts orally because they can difficult to enforce in the face of the law.

If an oral contract is brought in front of a court of law, there is increased risk of one party (or both!) lying about the initial terms of the agreement. This is problematic for the court, as there's no unbiased way to conclude the case; often, this will result in the case being disregarded. Moreover, it can be difficult to outline contract defects if it's not in writing.

That being said, there are plenty of situations where enforceable contracts do not need to be written or spoken, they're simply implied. For instance, when you buy milk from a store, you give something in exchange for something else and enter into an implied contract, in this case - money is exchanged for goods.

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When are verbal agreements not enforceable?

There are some types of contracts which must be in writing.

The Statute of Frauds is a legal statute which states that certain kinds of contracts must be executed in writing and signed by the parties involved. The Statute of Frauds has been adopted in almost all U.S states, and requires a written contract for the following purposes:

The sale of real estate or vehicles
Real estate leases lasting longer than one year.
Property transfer following the death of the owner.
The case of a party agreeing to pay debt for someone else.
Any contract that requires more than a year to fulfil.
A contract involving and exceeding a specified amount of money (which varies by state).

Typically, a court of law won't enforce an oral agreement in any of these circumstances under the statute. Instead, a written document is required to make the contract enforceable.

Contract law is generally doesn't favor contracts agreed upon verbally. A verbal agreement is difficult to prove, and can be used by those intent on committing fraud. For that reason, it's always best to put any agreements in writing and ensure all parties have fully understood and consented to signing.

How are Verbal Contracts Enforced?

Verbal agreements can be proven with actions in the absence of physical documentation. Any oral promise to provide the sale of goods or perform a service that you agreed to counts as a valid contract. So, when facing a court of law, what evidence can you provide to enforce a verbal agreement?

How can you prove an oral contract?

Unfortunately, without solid proof, it may be difficult to convince a court of the legality of an oral contract. Without witnesses to testify to the oral agreement taking place or other forms of evidence, oral contracts won't stand up in court. Instead, it becomes a matter of "he-said-she-said" - which legal professionals definitely don't have time for!

If you were to enter into a verbal contract, it's recommended to follow up with an email or a letter confirming the offer, the terms of the agreement , and payment conditions. The more you can document the elements of a contract, the better your chances of legally enforcing a oral contract.

Another option is to make a recording of the conversation where the agreement is verbalized. This can be used to support your claims in the absence of a written agreement. However, it's always best to gain the permission of the other involved parties before hitting record.

Written vs Verbal Contracts: What's the Verdict?

Fundamentally, most verbal agreements are legally valid as long as they meet all the requirements for a contract. However, if you were to go to court over one party not fulfilling the terms of the contract, proving that the interaction took place can be extremely taxing.

So, ultimately, the question is: written or verbal agreements?

Any good lawyer, contract law firm, or legal professional would advise you to make sure you formalize any professional agreement with a written agreement. Written contracts provide a secure testament to the conditions that were agreed and signed by the two parties involved. If it comes to it, a physical contract is much easier to eviden in legal circumstances.

Freelancers, in particular, should be aware of the extra security that digital contracts may provide. Many people choose to stick to executing contracts verbally because they're not sure how to write a contract, or they think writing out the contract terms is too complicated or requires expensive legal advice. However, this is no longer the case.

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Motion design / animation

Say hello to digital contracts

Today, we have a world of resources available at our fingertips. The internet is a treasure trove of invaluable information, platforms, and software that simplifies our lives. Creating, signing, and sending contracts has never been easier. What's more, you don't have to rely on a hiring a lawyer to explain all that legal jargon anymore.

There are plenty of tools available online for freelancers to use for guidance when drafting digital contracts. Tools like Bonsai provide a range of customizable, vetted contract templates for all kinds of freelance professionals. No matter what industry you're operating in, Bonsai has a professional template to offer.

Benefits of written contracts

A written contract makes the agreement much easier to prove the terms of the agreement in case something were to go awry. The two parties involved can rest assured that they're legal rights are protected, and the terms of the contract are sufficiently documented. Plus, it provides both parties with peace of mind to focus on the tasks at hand.

Create Professional Contracts with Bonsai

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With Bonsai, you can streamline and automate all of the boring back-office tasks that come with being a freelancer. From creating proposals that clients can't say no to, to sealing the deal with a professional contract - Bonsai will revolutionize the way you do business as a freelancer.

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