Top 5 Tax Benefits of an S-Corp for Real Estate Agents

As a real estate agent, you're an expert at closing deals. But are you maximizing your tax savings? If not, it’s time to consider forming an S-Corp. Here’s a closer look at how an S-Corp can help you retain more of your hard-earned commission and improve your overall financial situation.

1. Lower Self-Employment Taxes

Self-employed individuals are responsible for paying both the employer and employee portions of Social Security and Medicare taxes, which total 15.3%. By forming an S-Corp, you’ll split your income into salary and distributions.

Only the salary portion is subject to payroll taxes, reducing your overall tax liability.

• Example: A real estate agent earning $120,000 might save $10,000 or more annually in self-employment taxes by structuring their income appropriately.

2. Deductible Business Expenses

As an S-Corp owner, you can deduct many expenses that are crucial to running your business, such as:

• Marketing and advertising costs (flyers, online ads, etc.).

• Professional fees (MLS subscriptions, legal services).

• Home office deductions (a percentage of your rent or mortgage).

3. Health Insurance Premiums

S-Corp owners can deduct health insurance premiums for themselves, their spouse, and dependents. This deduction reduces taxable income and ensures your family is covered.

4. Retirement Plan Contributions

An S-Corp allows you to set up retirement plans like a Solo 401(k) or SEP IRA. These plans not only secure your financial future but also reduce your taxable income through contributions.

• Example: Contributing $20,000 to a Solo 401(k) can lower your taxable income significantly, offering both short-term and long-term benefits.

5. Legal Protection

While not a direct tax benefit, the liability protection provided by an S-Corp structure is invaluable. It separates your personal assets from business liabilities, giving you peace of mind.

Client Success Story

Jeremy Martini, a Real Estate Broker at John L. Scott, found peace of mind with Formations managing his expenses and taxes. He states, "Formations is always there to answer all my questions. They've given me peace of mind with my expenses, providing a great service to allow me to focus on growing my business and have really helped with saving on taxes." Read more about Jeremy’s experience.

Don’t leave money on the table this tax season. Let Formations help you transition to an S-Corp. Answer a few questions to get started and pick the right package for your needs.