Sunday, June 23, 2024

How to Deduct Your BiggerPockets Membership on Your Taxes

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With all the forums, articles, e-books, and other information available on BiggerPockets, there’s no doubt about the added value of this community. But did you know that BiggerPockets costs are also tax-deductible?

For real estate investors, Members can write off BiggerPockets membership fees (and other educational material) under professional development tax guidelines. That means BiggerPockets can help you make money in real estate while also saving you money in taxes. Double win!

What is a tax deduction?

Tax deductions indirectly reduce the amount of tax you owe by subtracting allowable expenses from your income. That adjusted income is then subject to the tax rate in your applicable tax bracket to determine your total tax liability.

Tax deductions are not tax credits. Tax credits directly reduce the amount of tax owed; they come straight off the bottom line, so to speak. Some tax credits also increase the amount of a refund.

On a personal level, taxpayers are entitled to either the standard deduction (which in 2021 is $12,550 for singles and $25,100 for couples) or itemized deductions, whichever is greater. If you believe that you have more personal deductible expenses than the standard deduction (such as mortgage interest, property tax, charitable donations, health costs, etc.), then it may be in your best interest to itemize your deductions.

In addition, taxpayers who have a business (like real estate investors) may be able to deduct certain business expenses regardless of whether they itemize their personal deductions or take the standard deduction. Business expenses are listed on a separate form separate from itemized deductions.

What are tax-deductible professional development expenses?

One of the business expense categories that can be claimed as a tax deduction is professional development, including dues and subscriptions. For many investors, that means BiggerPockets membership fees and materials are one of the deductible expenses that you may deduct on your taxes. Some of the other tax-deductible items may include your travel and tickets to BPCon as well as real estate-related business books. 

Is the cost of BiggerPockets tax-deductible?

Yes! As mentioned, BiggerPockets memberships, books, and other materials are tax-deductible since they are real estate business expenses. BiggerPockets products are typical costs that investors incur in order to help with their real estate investments. Therefore, those costs are generally tax-deductible business expenses that can help to reduce taxable income from rentals, flips, wholesales, BRRRRs, and commissions.

For newbie investors who end up with no real estate income in the current year, BiggerPockets expenses can be carried forward to offset real estate income generated in future years. If you have no current real estate income to offset, you will want to reserve the BiggerPockets deduction and use it in a year when you do generate real estate income. More on this in the next section.

Dreading tax season?

Not sure how to maximize deductions for your real estate business? In The Book on Tax Strategies for the Savvy Real Estate Investor, CPAs Amanda Han and Matthew MacFarland share the practical information you need to not only do your taxes this year—but to also prepare an ongoing strategy that will make your next tax season that much easier.

How would I enter a BiggerPockets deduction on my taxes?

To take business-related deductions, most tax filers will need to fill out Schedule C or Schedule E of Form 1040. If you earn rental income, you will likely report these expenses on Schedule E. If you earn active real estate income, you will generally report these items on Schedule C. These schedules specifically detail profit and loss from business activities, which therefore keeps business deductions separate from personal deductions. 

Professional development expenses such as BiggerPockets costs are commonly claimed to offset the related income. For example, if you are a landlord, these professional development expenses are claimed against your rental income in the year you incur them. If you are a real estate wholesaler, the expenses can offset your wholesale income. It is important to make sure you keep copies of your receipts and charges for these business expenses. 

As always, tax situations differ greatly, so if you have any questions about how to maximize your real-estate-related deductions, be sure to talk with an accountant. Our professional services network can help you locate an investor-friendly accountant in your area.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.

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