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Industry Education
October 25, 2023

Tax's, Retirement, and Health Insurance For Real Estate Agents

As a real estate agent you are a 1099 contractor. This means you are self employed and don’t have many advantages a W2 employee often has when it comes to taxes, retirement, and health insurance. These are 3 things you’ll have to pay for and plan on your own and it’s important to have a plan as early on in your real estate career as possible. Let’s talk about each of these individually.

  1. Let’s talk about taxes. Most real estate agents receive income in the form of commissions from sales transactions and aren’t considered an employee under federal tax guidelines, but rather a self-employed sole proprietor. This self-employed status allows you to deduct many of the expenses you incur throughout the year. Careful record keeping and knowing your eligible write-offs are key to getting all of the tax deductions you're entitled to. Make sure you set aside a certain percentage of each commission check you earn to pay your taxes. It would be best to speak with a licensed accountant about this.
  2. Now let’s discuss retirement plans. When you don’t have an employer-sponsored 401(k) you have 4 traditional options for your retirement plan. You can set up a Roth IRA, Traditional IRA, Solo 401(k), or a SEP IRA. We suggest reaching out to a financial planner. A financial planner can help you understand the details of each option available to you and help you paint the appropriate picture for what you want your life to look like down the road. It can’t be iterated enough on how important it is to set this up as early as possible in your real estate career. Many real estate agents fail here.
  3. Lastly let’s discuss health insurance for real estate agents. It’s challenging for anyone who isn’t covered as an employee to find affordable health insurance, and it’s one of those things every real estate agent hates to pay for and research. But you’ll need to get this setup right away if you aren’t on a spouse's plan. This might be obvious but it is sometimes forgotten. You can check out our more in depth blog on health insurance options for real estate agents here.

If you have your taxes, retirement and health insurance plans setup before your first sale, then you’ll be way ahead of the curve. There'll be a few less things you have to worry about as you begin a new career and it will give you a better shot at being successful!