How Real Estate Brokers & Agents Can Simplify Their Accounting and Maximize Deductions

Why Your Accounting Needs Are Different as a Real Estate Broker or Agent

If you're a licensed real estate agent or broker, you’re likely classified as an independent contractor. That means you're self-employed, even if you’re affiliated with a brokerage.



This classification affects nearly every aspect of how your taxes and accounting are handled. You're responsible for:

• Paying self-employment tax, which includes both the employer and employee portions of Social Security and Medicare
• Filing estimated taxes quarterly
• Tracking your income and business expenses in detail
• Making decisions about how to structure your business legally

Unlike employees who receive a paycheck with taxes withheld, you're in charge of managing all of these pieces. That independence creates both opportunities and responsibilities.

At Presti & Naegele, we help real estate professionals understand and navigate these nuances. With the right systems in place, you can run a smoother, more profitable business—and reduce your tax burden significantly.

Choosing the Right Business Entity for Your Real Estate Practice

One of the most important decisions you’ll make is how to legally structure your business. The business entity you choose directly impacts your taxes, liability, and how you pay yourself.

Here are the common options for real estate professionals:

Sole Proprietorship

This is the default setup for many real estate agents. It’s simple—no formal registration needed—but offers no personal liability protection. All income is reported on your personal tax return. While this may work early on, it’s not ideal for scaling or minimizing tax liability.

Limited Liability Company (LLC)

An LLC provides personal liability protection while keeping your tax reporting relatively simple. You can choose to be taxed as a sole proprietor, partnership, or even elect S-Corporation status. This flexibility is a big reason many agents choose this route.

Partnership

If you work with another agent or investor, a partnership might make sense. It allows for shared responsibility and tax flexibility, but you’ll need a clear agreement outlining how profits, losses, and responsibilities are divided.

S-Corporation

An S-Corp can offer significant tax advantages, especially if you're earning a high income. You’ll pay yourself a reasonable salary (subject to employment taxes), and the remaining profits can pass through to you as distributions, which are not subject to self-employment tax.

C-Corporation

Rarely used by solo agents, a C-Corp is a separate legal entity that pays its own taxes. This structure makes sense in specific, high-growth business models but is more complex and can lead to double taxation if not managed correctly.

Choosing the right structure depends on your income, growth plans, and tolerance for administrative work. We help our clients evaluate their options and select the best entity for long-term tax efficiency and legal protection.

You can learn more about entity setup and support on our Accounting for Real Estate Brokers & Agents page.

Must-Have Record-Keeping Practices for Real Estate Professionals

Accurate, consistent record keeping is essential. Not only does it ensure you're ready for tax filing, but it also makes it easier to spot deductions, budget effectively, and avoid penalties.

Here’s what every real estate professional should track:

• Commission income: Track all gross commissions before broker splits or referral fees.
• Marketing expenses: Signs, photography, advertising, and online platforms like Zillow or Facebook.
• Home office expenses: If you have a dedicated space, a portion of your home costs (rent, utilities, internet) may be deductible.
• Vehicle and mileage: Business-related driving adds up. Either track mileage or actual vehicle expenses.
• Professional fees: Brokerage fees, licensing, MLS access, and dues.
• Travel and meals: Client meetings, showings, or events may qualify for partial deductions.
• Continuing education: Seminars, licensing courses, and training programs.

You can do this with spreadsheets, but many of our clients prefer using bookkeeping software—or having us manage it for them entirely.

Presti & Naegele offers tailored property accounting services that help real estate professionals stay organized, compliant, and prepared year-round.

Common Tax Deductions for Real Estate Brokers & Agents

Knowing what you can deduct—and tracking it properly—can make a huge difference in your bottom line.

Here are the most common deductions our clients claim:

Business Expenses

Nearly every cost related to earning income in real estate may be deductible:

• Listing photography
• Business cards and flyers
• Software subscriptions
• Brokerage desk fees
• Internet and phone usage (business portion)

Home Office Deduction

If you have a dedicated workspace in your home used exclusively for business, you can deduct a portion of:

• Rent or mortgage interest
• Utilities
• Insurance
• Maintenance costs

Vehicle Expenses

If you drive to showings, client meetings, or open houses, track:

• Mileage (using the IRS standard mileage rate)
• Fuel
• Maintenance
• Lease payments or depreciation

Meals and Entertainment

You can typically deduct 50% of meals incurred during business-related meetings. Be sure to document:

• Date
• Location
• Attendees
• Purpose of the meeting

Education and Training

Whether it's a required continuing ed course or a professional development seminar, many educational costs are deductible if they relate to your business.

Health Insurance Premiums

If you're self-employed, you may be able to deduct the premiums you pay for medical, dental, and qualifying long-term care insurance.

All of these deductions require documentation. At Presti & Naegele, we help our clients track these expenses properly and ensure they’re taking full advantage of what the law allows.

Retirement & Benefit Options for Real Estate Professionals

As a self-employed real estate professional, you have access to powerful retirement options that are often overlooked. These plans not only help you prepare for the future—they can also reduce your taxable income today.

Solo 401(k)

Ideal for sole proprietors or single-owner LLCs, a Solo 401(k) allows you to contribute:

• Up to $22,500 (or $30,000 if age 50+)
• Plus, an employer contribution of up to 25% of your net earnings

This adds up to a large annual contribution limit, offering both retirement savings and tax reduction.

SEP IRA

A Simplified Employee Pension IRA is easier to set up than a 401(k) and allows employer contributions (you, as your own employer) of up to 25% of your net earnings, up to a maximum cap.

Defined Benefit Plan

More complex, but ideal for high earners who want to contribute significantly to retirement in a short time. The amount is based on age, income, and retirement goals. These plans often suit brokers or agents in their 50s who want to accelerate retirement contributions.

Health Savings Account (HSA)

If you have a high-deductible health plan, an HSA offers a triple tax benefit:

• Contributions are tax-deductible
• Growth is tax-free
• Withdrawals for qualified medical expenses are tax-free

At Presti & Naegele, we help clients integrate these benefits into their broader accounting strategy so they’re maximizing both short-term and long-term financial outcomes—without needing to become tax experts themselves.

How We at Presti & Naegele Support Real Estate Agents & Brokers

Real estate professionals need more than generic accounting help. You need someone who understands the way your business works—and can support you year-round, not just at tax time.

That’s where we come in.

We specialize in accounting for real estate brokers and agents, helping professionals nationwide set up and maintain tax-efficient businesses that scale. Our services are designed specifically for the real estate industry.

What we offer:

• Help choosing and setting up the right entity
• Monthly or quarterly bookkeeping
• Tax preparation and compliance
• Help identifying and tracking deductions
• Retirement plan setup assistance
• Ongoing support for questions and strategy

We work with clients across the U.S., including in major markets like New York, Los Angeles, Miami, Chicago, San Francisco, Houston, and more.

Our goal is to simplify your accounting so you can focus on selling homes—not spreadsheets.

Visit our Real Estate Accounting Services page to learn more or request a free consultation.

Conclusion: Make Your Accounting Work For You, Not Against You

Accounting doesn’t have to be a headache. With the right setup, it can be a powerful tool that helps you grow your business, save on taxes, and gain peace of mind.

To recap:

• You're considered self-employed, which changes how you handle taxes and deductions
• Choosing the right business entity can significantly impact your tax bill
• Accurate record keeping is critical and easier than it sounds with the right system
• You may be missing out on common deductions if you’re not tracking them carefully
• You have access to retirement and health benefit options that can boost your savings

At Presti & Naegele, we help real estate professionals like you streamline your accounting and make informed decisions that protect and grow your business.

Ready to simplify your accounting and reduce your tax burden?
Contact us today for a free consultation.