industry guides

Real Estate Agent Bookkeeping: A Complete Guide for Realtors

Master bookkeeping as a real estate agent. Learn how to track commissions, maximize deductions, manage irregular income, and keep your finances organized for tax season.

KW
Kevin Wilson
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Real estate agents have unique bookkeeping challenges: irregular commission income, high business expenses, deals that fall through, and multiple income sources. Most CPAs don’t fully understand the real estate agent business model, and generic bookkeeping advice misses important industry specifics.

I’ve worked with dozens of realtors in Utah, from solo agents to team leaders. This guide covers everything you need to keep your books accurate, maximize your deductions, and stress less about money.

Why Real Estate Agent Bookkeeping Is Different

Before diving in, let’s understand what makes your situation unique:

Irregular Income

Most people get a paycheck every two weeks. You might close three deals in one month and nothing the next. This feast-or-famine pattern makes budgeting and cash flow management challenging.

Self-Employment Status

Most agents are independent contractors, not employees. This means:

High Expense-to-Income Ratio

Real estate agents typically have significant business expenses:

These deductible expenses can substantially reduce your tax burden—if you track them properly.

Commission Splits and Fees

Your gross commission rarely equals your take-home:

Understanding the difference between gross and net commission is essential.

Setting Up Your Books

Business Entity Structure

Most agents operate as:

Consult a CPA about your specific situation, but understand that your entity choice affects how you do bookkeeping.

Separate Business Accounts

If you haven’t already, open:

Never co-mingle personal and business finances. Commission checks go into business accounts; personal expenses come from personal accounts.

Accounting Software

Choose software that works for your needs:

For simple situations (fewer than 100 transactions/month):

For most agents:

For teams or high-volume agents:

The key is consistency. Any system works if you use it.

Chart of Accounts for Real Estate Agents

Set up these accounts at minimum:

Income:

Expenses:

Tracking Commission Income

Record Gross Commission

When you receive a commission check, it’s often net of fees. But for bookkeeping, track the full gross commission and the fees separately:

Example:

How to record:

  1. Record $15,000 income
  2. Record $4,500 expense (brokerage fees)
  3. Record $395 expense (transaction fees)
  4. Deposit matches net check: $10,105

This accurately reflects your revenue and shows true expenses.

Track by Deal

Consider tracking income by property or deal:

Most accounting software lets you add a customer or project for each deal.

Referral Fees (Paid and Received)

Referral income received: Record as commission income (you’ll issue a 1099 to the referring agent if over $600).

Referral fees paid: Record as an expense (you’ll receive a 1099 from the referral source).

Keep documentation of referral agreements.

Team Income and Splits

If you’re on a team or run one:

Maintain clear records of split arrangements.

Expense Tracking and Deductions

This is where good bookkeeping pays off. Every legitimate deduction you capture reduces your tax bill.

Vehicle Expenses

Real estate agents drive—a lot. Track your mileage carefully.

Standard mileage method:

Actual expense method:

What counts as business mileage:

What doesn’t count:

Pro tip: Use a mileage tracking app (MileIQ, Everlance, Stride) that logs automatically.

Home Office Deduction

If you work from home, you may qualify for the home office deduction:

Requirements:

Simplified method: $5 per square foot, up to 300 sq ft ($1,500 max)

Regular method: Calculate actual expenses based on percentage of home used for business

If you have a legitimate home office, this deduction also allows you to deduct commuting miles to other business locations.

Marketing and Advertising

Fully deductible expenses:

Keep receipts and document the business purpose.

Technology and Tools

Common deductible expenses:

Professional Fees and Dues

Fully deductible:

Client Entertainment and Gifts

Meals with clients: 50% deductible (keep receipt and note who attended and business purpose)

Client gifts: Deductible up to $25 per recipient per year

Closing gifts: Technically limited to $25, but items for the property (vs. personal gifts) may be classified differently. Consult your CPA.

Staging and Showing Expenses

If you pay for:

These are typically deductible if they’re your expense (not the seller’s).

Managing Cash Flow with Irregular Income

Build a Reserve

Target 3-6 months of expenses in a savings account. This is your buffer between deals.

How to build it:

  1. When a check comes in, immediately transfer 20-30% to savings
  2. Only pull from savings for real shortfalls
  3. Rebuild after pulling

Budget Based on Realistic Income

Don’t budget based on your best year. Use conservative assumptions:

Separate Tax Money Immediately

When a commission check arrives:

If you do nothing else, do this. Tax surprises are the #1 financial stressor for real estate agents.

Profit First for Realtors

The Profit First system works well for irregular income:

This prevents the “spend it all, nothing left for taxes” problem.

Quarterly Estimated Tax Payments

As a self-employed agent, you’re required to make quarterly estimated tax payments.

Due Dates

How Much to Pay

Options:

  1. 100% of prior year tax (110% if income over $150K): Safe harbor, no penalty
  2. 90% of current year tax: May be lower, but risk of underpayment penalty
  3. Pay as you go: Estimate based on actual income each quarter

If your income is irregular, option 1 provides certainty even if you overpay.

Track Your Payments

Record estimated tax payments as owner’s draws (not expenses). They’re not deductible—they’re prepayment of tax liability.

Common Mistakes Real Estate Agents Make

Mistake 1: Not Tracking Mileage

Vehicle expenses are often the largest deduction for agents. Without a mileage log, you can’t claim them—and the IRS specifically looks for this.

Fix: Start a mileage tracking app today.

Mistake 2: Missing Deductible Expenses

If you pay cash or use a personal card for business expenses, they often get forgotten.

Fix: Use a business card for all business purchases. Review statements monthly.

Mistake 3: Recording Net Instead of Gross

Recording only the net check deposited understates both income and expenses.

Fix: Record gross commission as income, then separately record brokerage fees and splits.

Mistake 4: Not Setting Aside Taxes

This is the classic problem. A $20,000 commission feels like $20,000 to spend. It’s not—$5,000-$7,000 of that is taxes.

Fix: Transfer 25-35% to a tax savings account before touching the rest.

Mistake 5: Failing to Keep Receipts

No receipt = no deduction. The IRS requires documentation.

Fix: Take a photo of every receipt immediately. Use an app that stores them.

Mistake 6: Not Tracking by Deal

Without deal-level tracking, you can’t analyze profitability by transaction type, marketing source, or client type.

Fix: Tag income and marketing expenses by deal or campaign.

Year-End Preparation

Before December 31

In January

For Your CPA

Provide:

Tools and Resources for Agents

Mileage Tracking

Expense Tracking

Accounting Software

Tax Prep

Your Next Step

If your books aren’t current, start with this:

  1. This week: Download last 3 months of bank and credit card statements
  2. Review each transaction: Categorize as personal or business
  3. For business expenses: Determine the correct category
  4. Enter into your accounting software: Even if behind, get caught up

Once current, establish a weekly habit:

Thirty minutes per week keeps you organized for tax time.

Need help organizing your real estate agent finances? At Profit Path Books, we work with realtors throughout Utah who want their books accurate, their deductions maximized, and their tax bill minimized. Book a consultation to discuss your situation.

KW

Kevin Wilson

Profit First Professional and QuickBooks ProAdvisor helping small business owners in Utah and beyond achieve financial clarity and consistent profitability.

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