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Business tax · Realtors

Tax planning for realtors: keep more of every commission.

Most agents are independent contractors paid on 1099s, so they pay self-employment tax on every commission and must manage their own deductions and estimates. With the right structure and records, agents can save thousands each year.

Forms & standards
IRC § 3508 (qualified real estate agents)IRC § 1402IRC § 162IRC § 274(d)IRC § 1362IRC § 469(c)(7)

Serving United States, Virginia, Washington, DC, Maryland.

What we handle

Where agents save

Under section 3508, licensed agents paid on commission under a written contractor agreement are treated as self-employed, so they owe self-employment tax on net commissions. Once income is steady, an S corporation with a reasonable salary can reduce that tax. Brokerage fees, desk fees, MLS and association dues, licensing and education, marketing, signs, photography, staging, client gifts within limits, phone and software are deductible, and vehicle costs need a contemporaneous mileage log under section 274(d).

Agents with uneven income should make quarterly estimated payments and fund a solo 401(k) or SEP in good years. Agents who also buy rental property may qualify as real estate professionals, because brokerage counts as a real property trade or business, letting rental losses offset commissions when the hour tests are met.

Speak with an advisor
  • Entity and S corporationWhen an S corporation pays off for an agent, and setting a reasonable salary.
  • Deductions and recordsMileage logs, marketing, fees, dues, home office and client gifts.
  • Quarterly estimatesSafe harbor payments for uneven commission income.
  • Retirement plansSolo 401(k), SEP and cash balance plans for top producers.
  • Teams and splitsTeam leader payroll, referral fees and 1099 reporting.
  • Agent-investorsReal estate professional status, cost segregation and 1031 exchanges.

Where we help

Rules that matter

Statute

IRC § 3508

Qualified real estate agents are treated as non-employees for federal tax purposes.

Statute

IRC § 274(d)

Vehicle and certain other deductions require written, contemporaneous records.

Statute

IRC § 469(c)(7)

Brokerage counts toward real estate professional status for agents who invest.

Ruling

Rev. Rul. 74-44

S corporation owners must take reasonable salary before distributions.

Our approach

How the engagement runs.

Review

A senior advisor reviews your facts and documents.

Plan

Scope, fees and timeline in an engagement letter.

File

Returns, elections and forms prepared and reviewed.

Support

IRS contact and planning all year.

Questions

Frequently asked

If your question isn't here, call (703) 880-8412 and you'll reach a person.

Should a realtor form an S corporation?

Often once net commissions are consistently well above a reasonable salary for the work. We compare the payroll tax savings with the added costs first.

Can I deduct my car?

Yes, for business driving, using the standard mileage rate or actual costs, with a mileage log kept as you go.

Are client closing gifts deductible?

Business gifts are limited to $25 per person per year, but many marketing and event costs are fully deductible.

Can my real estate investments offset my commissions?

If you qualify as a real estate professional and materially participate, rental losses can offset commission income.

Latest updates

IRS & federal tax

All IRS & federal tax updates
Nov 5, 2026IRS & federal tax

IRS releases 2027 inflation adjustments (Rev. Proc. 2026-35)

For 2027 the joint-return standard deduction rises to $33,200, the estate tax basic exclusion to $15,480,000, the annual gift exclusion to $20,000 and the Section 179 expensing limit to $2,640,000. Our advisors recommend revisiting year-end gifting and equipment purchase plans with these figures in mind.

Source: IRS (IR-2026-133)

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