Accounting for Real Estate Brokers & Agents
Real Estate Agents and Brokers
At Presti & Naegele, we have a long history providing tax and advisory services for real estate brokers and agents. Each real estate agent’s situation is unique. As a Real Estate Agent, managing your taxes is crucial for optimizing your financial well-being.
Since you’re not an employee of your real estate brokerage firm or agency, you’re considered self-employed. This means you owe the “self-employment tax,” which includes Social Security and Medicare taxes. In addition, if your state collects income tax, regular estimated tax payments to your state are also necessary.
CHOOSING THE RIGHT BUSINESS ENTITY
Legal Structure:
How Real Estate agents pay taxes depends on the structure of their business. At P&N, we can evaluate your situation and recommend the right entity for your business.
Sole Proprietorship – A sole proprietorship is the simplest form of business, where the owner and the business are one.
Limited Liability Company (LLC) – An LLC combines the liability protection of a corporation with the flexibility of a partnership.
Partnership – A partnership involves two or more individuals or entities sharing ownership and responsibilities.
S-Corporation – An S-Corporation is a pass-through entity that combines features of
corporations and partnerships.
C-Corporation – A C-Corporation is a separate legal entity owned by shareholders. It’s the most complex structure.
Record Keeping
Keeping track of financial transactions, commissions, expenses, and tax-related documents is essential. Proper records facilitate accurate accounting, tax reporting, and financial planning. That's why you need
Property Accounting Services.
Tax Deductions
As a self-employed real estate agent, you’re eligible for various tax deductions via our property accounting services. Some common ones include:
- Business Expenses: Deductible expenses related to your real estate business, such as marketing costs, office supplies, and professional fees.
- Home Office Deduction: If you have a dedicated home office space, you can deduct a portion of your home-related expenses (like rent, utilities, and insurance).
- Vehicle Expenses: Deduct mileage or actual vehicle expenses related to business use.
- Meals and Entertainment: You can deduct a percentage of meals and entertainment expenses incurred while conducting business.
- Education and Training: Costs for real estate courses, seminars, and professional development may be deductible.
- Health Insurance Premiums: If you’re self-employed, you can deduct health insurance premiums.
Retirement Planning
As a Real Estate Agent, you have several retirement options to help you defer earnings and secure your financial future. Some of the more popular choices:
- Solo 401K Plans – Available to self-employed individuals or small business owners. The total annual limit is substantial. Contributions are tax-deductible, and earnings grow tax-deferred until withdrawal.
- Simplified Employee Pension (SEP) IRAs – Ideal for self-employed individuals and small business owners. Contributions are tax-deductible and earnings grow tax deferred. Employers can contribute up to a certain percentage of their net earnings (up to a specified limit).
- Defined Benefit Plans – A retirement plan in which the employer or sponsor guarantees a specific payment to employees upon retirement. This payment can take the form of a pension, a lump sum, or a combination of both. Unlike other retirement plans (such as 401(k)s or IRAs), DBPs focus on providing a predetermined benefit rather than relying on individual contributions or investment returns. Employers receive tax deductions for contributions made to the DBP. Investment gains within the plan grow tax-deferred until distribution.
- Health Savings Accounts (HSA) - The Triple Threat of Tax Benefits. Health Savings Accounts contributions are tax deductible, investments grow tax-free and withdrawals for qualified medical expense are tax-free.
Need More Information?
Contact Presti & Naegele today for a free consultation regarding property accounting services for real estate brokers and agents.
For inquiries or expert guidance, contact Presti & Naegele Accounting Offices. Your success awaits!
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WHAT OUR CLIENTS ARE SAYING
I have had my business for more than 10 years and struggled through several *truly awful* accountants in the early years. I found Presti & Naegele about five years ago and have never looked back. They are a life-changing breath of fresh air and they will be my accountants for as long as I live. Donald Sager brings me confidence, peace and calm in an area of the business that would otherwise be stressful. He knows what he's doing and is always extremely responsive and ready with a plan of action and to explain anything at all. I am so grateful for him!
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