Am I considered self-employed for tax purposes?

Yes. Most real estate agents are classified as independent contractors, not employees. This means you’ll report your income and expenses on Schedule C and pay both income tax and self-employment (SE) tax for Social Security and Medicare.

What taxes do I need to pay?

• Federal income tax

• State income tax (if applicable)

• Self-employment tax (15.3%)

  Because taxes aren’t withheld from your commissions, you usually need to make quarterly estimated tax payments.

What expenses can I deduct?

Common deductions include:

• Brokerage fees and commissions

• MLS and professional dues

• Advertising and marketing (signs, flyers, online ads)

• Client meals and gifts (subject to IRS limits)

• Office rent or home office expenses

• Business supplies and software (CRM, DocuSign, etc.)

• Vehicle expenses (standard mileage or actual costs)

• Education, licensing, and continuing professional development

Can I deduct my car expenses?

Yes, but you must choose between:

• Standard mileage rate (tracks business miles x IRS rate), or

• Actual expense method (gas, insurance, repairs, depreciation).

  Good mileage logs are essential.

How does the home office deduction work?

If you have a dedicated workspace at home used exclusively for your real estate business, you may qualify for the home office deduction. This can include a portion of rent/mortgage interest, utilities, and internet.

Should I set up an LLC or S-Corp?

Many agents operate as sole proprietors, but forming an LLC can provide liability protection. Electing S-Corp status may reduce self-employment taxes by paying yourself a reasonable salary and taking additional income as distributions. Talk to a tax advisor to see if it makes sense once your net income is consistently above ~$80K.

Do I need to keep receipts for everything?

Yes. The IRS requires substantiation of expenses. Keep digital or physical receipts, mileage logs, bank statements, and credit card records. Cloud storage or apps like QuickBooks, Expensify, or MileIQ help.

What about retirement savings?

As an independent contractor, you can open tax-advantaged retirement accounts:

• SEP IRA (easy to set up, high contribution limits)

• Solo 401(k) (allows both employee and employer contributions, plus Roth options)

  Contributions lower your taxable income and help you save for retirement.

How should I handle health insurance?

If you buy your own health insurance, premiums may be deductible on your tax return, even if you don’t itemize deductions.

Do I pay tax when I receive commission advances?

Yes. Even if you receive a commission advance, it’s still taxable income when received. Plan ahead so you aren’t caught short at tax time.