Bookkeeping for real estate agents

Follow one check from closing to your bank

Picture a Thursday closing on a $420,000 house. The listing agreement paid 2.5% to your side, so the gross commission is $10,500. You do not see $10,500. The title company wires it to your brokerage. The brokerage keeps its 30% split ($3,150) and a $395 transaction fee, and sends you $6,955 a few days later.

Which number is your income? The answer depends on what the brokerage reports. Many brokerages put the full $10,500 on your Form 1099-NEC and treat the split as their charge to you. Others report only what they paid you. Look at last year’s form or ask the office manager, then match it.

If the form shows the gross, record $10,500 as income and record the $3,150 split and the $395 fee as expenses on line 10, commissions and fees. If the form shows only the net, record $6,955 as income and do not also deduct the split. Either way your profit is the same. What matters is that your income line matches the form the IRS also gets, so nobody has to explain a gap later.

In Righto, one deposit can be split into lines: $10,500 income, minus $3,150 and $395 in fees, landing at the $6,955 that hit the bank. The bank balance still reconciles to the cent, and the 1099 still matches.

The costs that come before any closing

An agent pays to be in the game long before the first check arrives. These costs are easy to forget because many are annual or come straight off a card.

Listing costs deserve a second look. A professional photographer at $250, a drone video at $175, a sign post and rider, and a few weeks of paid social ads can come to $900 before the house sells. If the listing expires, that money is gone. Tag each listing cost with the property address in the memo. At year end you can see which listings paid and which ones cost you, and you can decide how much to spend on the next one.

Closing gifts are another trap. The IRS allows only $25 per person per year for business gifts (see Publication 463). A $150 bottle of wine for a couple counts as gifts to two people, so the most you deduct is $50. Record the full cost, and put only the deductible part on line 27b, or keep a note so your preparer can adjust it.

Your car is your office

Most agents drive more than they think. Showings, open houses, inspections, appraisals, a run to drop off keys. Fifteen thousand business miles a year is common.

You can deduct either the standard mileage rate or your actual car costs times the business share. For 2026 the IRS set the standard rate at 72.5 cents a mile from January 1 to June 30 and 76 cents from July 1 (Announcement 2026-11). At 7,500 miles in each half of the year, that is $5,437.50 plus $5,700, or $11,137.50 on line 9. Parking and tolls for business trips are added on top.

That deduction depends on a log. The IRS wants the date, the place, the business purpose and the miles for each trip, written at or near the time (Publication 463, chapter 5). A log rebuilt from a calendar in March is weak. A phone app, or a note at the end of each day, is strong. The drive from home to your brokerage office can be commuting, which is not deductible, unless your home is your main place of business. Ask your preparer how that rule applies to your setup. Our mileage deduction calculator shows what your log is worth at each rate.

Gear, de minimis and depreciation

A new laptop at $1,900, a camera for your own listing photos at $1,100, a lockbox set at $400. Under the de minimis safe harbor, a business without audited financial statements can expense items that cost $2,500 or less per item or invoice, if you elect it on your return each year (see the IRS page on tangible property regulations). Those go on line 22, supplies.

A car you buy for the business is different. If you use actual costs, the car is depreciated on line 13, and there are special limits for passenger cars (Publication 946 and Publication 463). If you choose the standard mileage rate in the first year, you cannot also deduct depreciation. Make this choice with your preparer before you file, because it is hard to change later.

One year in numbers

Here is a year for an agent we will call Dana, who closed nine deals.

Self-employment tax is 15.3% of 92.35% of net profit: $43,566 × 0.9235 × 0.153, about $6,156. Income tax comes on top, after half of the SE tax and her other deductions. The self-employment tax calculator does the arithmetic for your own numbers.

Notice where the money went. Almost a third of the gross commission never reached Dana. That is why gross commission is a poor measure of a good year. Net profit per closing, here about $4,840, is the number to watch.

Set money aside the day it lands

The problem with lumpy income is that the tax bill is not lumpy. Estimated payments are due in April, June, September and January, whether you closed anything that quarter or not. The estimated tax dates page lists the exact days.

A simple habit works better than a clever formula. When a commission lands, move a fixed share to a separate savings account the same day. Many agents use 25% to 30% of the net deposit; your preparer can tighten that after one year of real numbers. Dana’s $6,955 check sends about $1,900 to savings before she spends any of it.

Also keep a cash cushion for slow months. Dues, E&O and the car payment do not stop in February. The cash runway tool shows how many months your current balance covers.

Mistakes that cost agents money

• Double counting the split. Recording the net deposit as income and also deducting the split. Match the 1099 instead.
• No mileage log. The largest deduction for many agents, lost because it was never written down.
• Gifts at full value. Only $25 per person per year is deductible.
• Mixing accounts. Personal groceries on the business card make every month harder. Use one account and one card for the business.
• Forgetting referral fees paid. If you pay another agent a referral fee through your brokerage, it belongs on line 10. Paying a person directly may need a 1099-NEC if the total reaches $2,000 for payments in 2026.

A weekly and monthly routine

Weekly, in fifteen minutes:

1. Import your bank and card statements (CSV, OFX, QFX or PDF; see importing statements).
2. Let your rules categorize the regular charges, like MLS dues and the CRM.
3. Add the property address to any listing cost.
4. Check that your mileage log is up to date.

Monthly, after the statement closes, reconcile each account to the cent. When a commission lands, split it into gross and fees, and move the tax share to savings.

What to hand your tax preparer

At year end, Righto’s year-end package gathers the profit and loss on the cash basis, the expense detail by Schedule C line, and the reconciled balances. Add to it:

• Every 1099-NEC from your brokerages, and any 1099-K
• The mileage log, with the total for each half of the year
• Records for any car or equipment you bought, with dates and prices
• Estimated tax payments, with dates
• Your home office measurements, if you have one (see the home office calculator)

The IRS Schedule C instructions and Publication 334 explain each line if you want to read the source.

General information, not advice for your situation. Ask a tax professional about your own return.