Tax tips for new real estate agents are essential for setting yourself up for success. Starting out as a real estate agent is exciting—you’re building your brand, creating your client base, and learning the ropes of the industry. But there’s one area that catches many new agents off guard: taxes.
If you’ve just passed your licensing exam and are stepping into the real estate world, understanding how taxes work is crucial—not just for compliance, but for keeping more of what you earn. At James D. Miller, CPA, we specialize in helping professionals like you stay on top of your finances from the start.
Here are essential tax tips for new real estate agents to help you build a strong financial foundation.
1. Understand Your Tax Status: You’re Self-Employed
Most real estate agents are classified as independent contractors, not employees. This means:
- You won’t receive a W-2 from your broker.
- Instead, you’ll likely get a 1099-NEC that reports your commissions.
- You’re responsible for calculating and paying your own income tax and self-employment tax (Social Security and Medicare).
Self-employment tax is currently 15.3% on net earnings—this is in addition to your regular federal and possibly state income tax.
2. Track Every Dollar: Income & Expenses
From the moment you close your first deal (or even before), it’s essential to start tracking your business finances.
Examples of deductible expenses:
- Real estate licensing and renewal fees
- Marketing and advertising (flyers, business cards, online ads)
- Website hosting and CRM software
- Continuing education and training
- Mileage driven for client meetings or showings
- Office supplies, phone, and internet costs
Tip: Keep all receipts and maintain digital or physical records. You’ll thank yourself come tax season.
3. Pay Quarterly Estimated Taxes
Because you don’t have taxes withheld from your commission checks, the IRS expects you to pay quarterly:
- Due dates: April 15, June 15, September 15, and January 15 (for the previous year)
- Payments are based on your projected income for the year
- Use Form 1040-ES or consult your CPA to calculate your estimated payments
Failing to pay quarterly can lead to underpayment penalties. A good rule of thumb is to set aside 25–30% of each commission for taxes.
4. Open a Separate Business Bank Account
Avoid mixing business and personal expenses. Open a dedicated checking account and credit card for all your real estate income and expenses.
Benefits:
- Easier bookkeeping
- Clearer audit trail
- More accurate deductions
Even if you’re a sole proprietor, financial separation adds credibility and simplifies tax preparation.
5. Consider Professional Bookkeeping Help
It’s easy to fall behind on organizing receipts, logging mileage, or reconciling income—especially when you’re focusing on building your business. That’s why many new agents hire a CPA or bookkeeper early on.
A professional accountant can:
- Help you set up a chart of accounts
- Track deductible expenses correctly
- File your taxes on time and correctly
- Advise on ways to reduce your tax burden
At James D. Miller, CPA, we work with real estate professionals across the country and provide customized support to help you grow your business responsibly.
6. Take the Home Office Deduction (If It Applies)
If you work from home, you may qualify for a home office deduction—but only if you meet IRS criteria:
- The space must be used regularly and exclusively for business
- It must be your principal place of business
You can deduct a portion of your rent/mortgage, utilities, insurance, and more. There’s a simplified method based on square footage, or you can itemize actual expenses.
7. Start Thinking Long-Term: Retirement and LLCs
As you establish yourself, think beyond just this year’s taxes.
- Consider opening a SEP IRA or Solo 401(k) to save for retirement and reduce taxable income
- Explore forming an LLC or S Corp if your income increases and you want legal protection or potential tax benefits
Not sure when to make these moves? We can help you evaluate what’s right for your stage of growth.
Final Thoughts
Becoming a successful real estate agent means being proactive—not just with your clients, but also with your finances. By learning tax basics early, you’ll avoid costly mistakes and set yourself up for long-term profitability.
If you’re a new agent and need help organizing your books, planning for taxes, or understanding what deductions apply to you, reach out to James D. Miller, CPA today. Let’s build your financial success together, one transaction at a time.
Need help with taxes or bookkeeping for your real estate business? Contact James D. Miller, CPA at jdmcpa4u.com for a consultation today.