Parker County has grown fast, and with it the number of licensed agents working the market from Aledo to Mineral Wells. Almost all of them are independent contractors paid by commission through a broker, which makes each one a self-employed business owner for tax purposes. Agents who understand that from the first closing have a much better year than agents who discover it in April.
How the income arrives
Commission splits come from the broker, typically with a 1099-NEC at year end. No tax is withheld. The gross figure on the 1099 is the starting point on Schedule C; broker fees, desk fees, and any split the broker retained before paying you are either already netted out or deductible, depending on how your brokerage reports.
Referral fees, bonuses from builders, and income from property management or transaction coordination are all business income too, and they may arrive with or without a form.
The expenses that are genuinely deductible
- Licensing, board dues, MLS fees and continuing education required to keep the license.
- Marketing — signs, photography, staging costs you paid, websites, printed material, paid listings, and advertising.
- Vehicle expense. Driving between showings, listings, closings and the office is business mileage. Driving from home to a single fixed office may be commuting. A contemporaneous log is the whole defense.
- Phone and internet, to the extent used for business.
- Errors and omissions insurance and any other business insurance.
- Lockboxes, supplies, software subscriptions, CRM tools.
- Client gifts, subject to a per-recipient limit that has not changed in a long time and is small.
- Meals with clients or referral partners where business was discussed, at the applicable percentage.
- Home office, if a space is used regularly and exclusively for the business and the brokerage does not provide you a dedicated office.
Clothing is the one agents ask about constantly. Ordinary business attire is not deductible even if you only wear it for work. Branded apparel with the logo on it is a different story.
The quarterly tax problem
Commission income is lumpy. A slow spring followed by three closings in June creates a large tax liability with nothing withheld against it. Quarterly estimated payments are how a self-employed person stays current, and the safe harbor rules give a way to set the amounts without predicting the year. We explained it in Safe Harbor: How to Stop Worrying About Underpayment Penalties.
A practical habit: when a commission check lands, move a fixed percentage into a separate savings account before it becomes part of the household budget. The percentage depends on your bracket; we can set it with you.
Retirement is a tax lever too
With no employer plan, agents have access to self-employed retirement plans that let them shelter a substantial share of a good year. A strong year is precisely the year to fund one. See SEP-IRA vs. Solo 401(k).
When to consider an entity
Texas allows agents to receive commissions through a business entity in certain circumstances, and once income is consistently high, an S-corp election can reduce self-employment tax. It also adds payroll, a separate return and franchise tax filing. The break-even is a calculation, and it is not the same for every agent.
Working with us
We prepare returns for agents across Aledo, Weatherford, Willow Park and the wider Parker County market as part of our self-employed and 1099 service, and we help set up the bookkeeping so year end is a report rather than a reconstruction. Get in touch before your next closing, not after your last one.
The first-year agent's checklist
If you are newly licensed, three things set up the rest. Open a separate account and run every commission and every business expense through it. Start a mileage log the week you get your license, because showings and inspections put more miles on a car than most agents realize and the deduction is only available if the log exists. And set aside a portion of every commission check for taxes before the money is spent, then make estimated payments on schedule. Agents who do those three things from the beginning rarely have a painful first April. Agents who wait until their first big year to think about it almost always do.
Agents working the Weatherford, Willow Park and Granbury markets are a regular part of our practice, and a planning conversation early in the year is the most valuable appointment most of them have.
This article is general information, not tax advice. Thresholds, forms and rules change from year to year, so confirm the details for your own situation before you file.
Newly licensed or finishing your first big year? Call RD Precision Tax Service in Weatherford at (817) 480-6649, or request a free estimate. Robert has prepared returns for clients across Weatherford, Parker County and the surrounding North Texas counties since 2017.
This article is general information, not tax advice, and tax rules change from year to year. Confirm current-year figures and talk with a professional about your specific situation before acting.
Common questions
Is a real estate agent an employee or self-employed?
Under federal rules, licensed agents paid substantially by commission under a written contract stating they are not employees are treated as self-employed. That is the arrangement at nearly every brokerage, which is why agents receive 1099s rather than W-2s.
Can I deduct the mileage from my house to the brokerage office?
If the brokerage office is your regular place of business, that trip is commuting and is not deductible. If your home office qualifies as your principal place of business, trips from home to showings and to the brokerage can be business miles. The home office determination matters.
Do I need to pay quarterly taxes as an agent?
If you expect to owe more than a small amount when you file, yes. Nothing is withheld from commissions, so estimated payments are the only way to pay as you go and avoid an underpayment penalty.
Have a question about your situation?
Robert prepares returns for individuals, contractors, and small business owners across Weatherford, Aledo, Willow Park, Springtown, Mineral Wells, and the rest of Parker County. Bring your questions — the first conversation is free.