How Much Do Real Estate Agents Really Pay in Taxes?

Most commission-based real estate agents who meet the IRS “qualified real estate agent” (statutory nonemployee) criteria are treated as self-employed for federal tax purposes. This generally requires that substantially all compensation is tied to sales or output rather than hours worked, and that there is a written contract stating the agent will not be treated as an employee for federal tax purposes.

As a common planning rule of thumb some agents use, total federal taxes may fall in the 25% to 35% range of net profit. After adding state income taxes, the combined total could reach 30% to 45%. These figures are not IRS benchmarks and can vary significantly depending on filing status, deductions and credits, other household income, self-employment tax wage base effects, and state or local tax rules.

TurboTax products that support Schedule C and 1099-NEC filers can calculate your full federal tax picture based on your actual entries. In the meantime, we’ll break down exactly how each layer works so you can understand where your percentage lands and how to manage it.

Self-employment tax

Most commission-based agents who meet the IRS statutory nonemployee criteria are treated as self-employed for federal tax purposes. That means they report income and expenses on Schedule C and calculate self-employment tax on Schedule SE.

Self-employment tax is 15.3% in total (12.4% Social Security + 2.9% Medicare). However, it is not applied directly to your full Schedule C net profit. The amount subject to self-employment tax is generally 92.35% of your net profit, which results in an effective rate of about 14.13% of net profit in many cases before the Social Security wage base cap applies.

The table below shows the estimated tax based on different levels of net profit.

Two important clarifications:

• First, the Social Security portion (12.4%) is subject to an annual wage base limit. Once your earnings exceed that limit, you stop paying the Social Security portion, but the 2.9% Medicare tax continues.
• Second, high earners may also owe an Additional Medicare Tax of 0.9% once income exceeds certain thresholds, which vary by filing status, including $200,000 (single), $250,000 (married filing jointly), and $125,000 (married filing separately).

Because this tax is derived from Schedule C net profit (after the net-earnings adjustment), even small changes in deductions can meaningfully affect the final number.

Federal income tax

Once you account for self-employment tax, federal income tax is the next piece of the puzzle — and the one that causes the biggest variation between agents.

Federal income tax is calculated on your taxable income, not your gross commissions. For self-employed agents, that typically means:

Many self-employed real estate agents may qualify for the Qualified Business Income (QBI) deduction under Section 199A, which can allow up to 20% of qualified business income to be deducted before federal income tax is applied (subject to income limits and other rules). This deduction reduces taxable income but does not reduce self-employment tax.

Unlike self-employment tax, which is a flat percentage (up to the Social Security wage base), federal income tax uses progressive brackets. That means different portions of your income are taxed at different rates, and your filing status (single, married filing jointly, etc.) matters a lot.

Two agents with the same $120,000 net profit could owe very different amounts in income tax depending on:

• Filing status
• Standard vs itemized deductions
• Retirement contributions
• Other household income

Here’s a simplified illustration combining income tax with the self-employment tax baseline:

Example 1: Single agent, $100,000 net profit

• Self-employment tax ≈ $14,130
• Federal income tax varies based on deductions and filing status
• Total federal taxes often land in the $25,000 to $32,000 range
• That’s roughly 25% to 32% of net profit federally, before state taxes.

Example 2: Married filing jointly, $150,000 net profit

• Self-employment tax ≈ $21,195
• Income tax layered on top
• Total federal taxes often fall in the $40,000+ range, depending on deductions

This is why agents often feel their tax burden climbs quickly as income increases — not because there’s one giant jump, but because additional income moves into higher brackets.

The important distinction:

• Self-employment tax creates your baseline cost (~15%).
• Federal income tax determines how much higher your total percentage climbs.

When you combine both, that’s how most agents land in the 25% to 35% federal range shown earlier. 

In TurboTax products designed for individual 1099 and Schedule C filers, you can enter your income and expenses, select your filing status, and the software will calculate self-employment tax, apply the appropriate deductions, and compute your federal income tax based on your entries.

Higher income add-ons

For most agents, the core federal tax stack is self-employment tax (15.3%) plus federal income tax. But once your income crosses certain thresholds, additional federal taxes can apply automatically.

These are not elections. You don’t opt in, and they’re triggered by income level.

Additional medicare tax (0.9%)

If your total income exceeds:

• $200,000 (Single)
• $250,000 (Married Filing Jointly)

You owe an additional 0.9% Medicare tax on the amount above that threshold. This is on top of the standard 2.9% Medicare portion already included in the 15.3% self-employment tax.

Example: If you’re single and earn $230,000, the extra 0.9% applies to the $30,000 above $200,000, not your full income.

This tax is calculated and reconciled on Form 8959.

Net investment income tax (3.8%)

The net investment income tax (NIIT) is different. It generally applies if you have certain types of net investment income — such as interest, dividends, capital gains, and some rental or passive income — and your modified adjusted gross income (MAGI) exceeds the applicable thresholds. 

The tax is calculated as 3.8% based on a formula that applies to the lesser of (a) your net investment income or (b) the amount your MAGI exceeds the threshold. Whether rental income is included depends on how the activity is classified for tax purposes.

If both conditions are met, a 3.8% tax can apply to qualifying investment income. It’s calculated on Form 8960.

Once your income approaches high-earner thresholds, estimating taxes manually gets complicated. You’re no longer just stacking 15.3% on top of income tax, but you also have to determine whether the additional medicare tax applies, whether any investment income triggers the 3.8% NIIT, and how those thresholds interact with your total income.

Tax software such as TurboTax will calculate these additional taxes based on the income and investment information you enter and generate the related forms when applicable, rather than requiring you to manually track each threshold.

Quarterly estimated payments

Most self-employed real estate agents don’t have federal income tax withheld from their commission checks. The IRS requires taxes to be paid on a pay-as-you-go basis through withholding and/or quarterly estimated tax payments. Because commission income often lacks withholding, many agents rely primarily on estimated payments.

The standard due dates are:

• Income earned Jan 1 to Mar 31 → April 15
• Apr 1 to May 31 → June 15
• Jun 1 to Aug 31 → September 15
• Sept 1 to Dec 31 → January 15 (following year)

If you don’t pay enough throughout the year, you may face underpayment penalties even if you pay in full at tax filing time.

Let’s say your total projected federal tax liability is $40,000 for the year. Instead of having it withheld gradually like a W-2 employee, you may need to send roughly:

• $10,000 in April
• $10,000 in June
• $10,000 in September
• $10,000 in January

That lump-sum structure is often why agents feel like they “pay more,” even when the percentage isn’t dramatically different from other earners.

Because commission income fluctuates, estimating these payments can be tricky. If your income spikes midyear, your required payments may change. TurboTax can help you estimate your tax liability based on the information you enter and prepare estimated tax worksheets or vouchers. You can revisit and update your estimates as your income changes during the year. If your commissions spike midyear or slow down, you can update the numbers and see the adjustment immediately.

Maximizing deductions to reduce taxes

For real estate agents, deductions are one of the biggest levers you have to reduce your tax bill. Because you’re taxed on net profit (not gross commissions), every legitimate business expense lowers:

• The income subject to self-employment tax (15.3%), and
• The income subject to federal income tax

Here are the common deductions to monitor:

• Vehicle and mileage: Driving to showings, listing appointments, inspections, closings, and client meetings.
• Marketing and advertising: Online lead platforms, website hosting, customer relationship management (CRM) software subscriptions, social media ads, photography, staging, signage, and print materials.
• Brokerage and professional fees: Broker splits, MLS dues, association fees, licensing costs, and E&O insurance.
• Home office expenses (if eligible): A dedicated space used exclusively and regularly for business.
• Education and coaching: Continuing education, professional development programs, and real estate coaching.
• Office supplies and technology: Laptops, phones, software, printers, and business-related subscriptions.

In TurboTax products designed for individual Schedule C and 1099-NEC filers, the software guides you through entering income and business expenses for Schedule C based on your entries. As you update your inputs during your session, you can see how changes affect your calculated self-employment tax and income tax results.

Instead of wondering whether a deduction “really makes a difference,” you can see the tax impact update in real time, helping ensure you claim legitimate expenses while understanding exactly how they affect your bottom line.

W-2 vs 1099 agents: Is there a difference?

Not all real estate agents are taxed the same way. Most are treated as self-employed (statutory nonemployees), but a smaller number are classified as W-2 employees. The structure is different — but the total tax burden can be closer than many expect.

1099 or Self-employed (statutory nonemployee) agents

Most commission-based agents fall into this category. They:

• Report income and expenses on Schedule C
• Pay self-employment tax (15.3%)
• Pay federal income tax
• Typically, make quarterly estimated payments

Because self-employed agents pay both the “employee” and “employer” share of Social Security and Medicare, they are responsible for the full 15.3% self-employment tax. However, the IRS allows them to deduct half of that amount (the employer-equivalent portion) as an above-the-line adjustment to income before federal income tax is calculated.

W-2 agents

The main distinction is that W-2 agents pay only half of the FICA tax. because their employer pays the other half. But economically, that employer portion is often factored into compensation structures.

• Have income tax withheld from each paycheck
• Pay FICA taxes (Social Security and Medicare) through payroll
• Do not file Schedule C for wage income

How much should you keep for taxes?

If you want a simple rule to stay ahead of taxes, set aside a percentage of net income, not gross commissions.

For most self-employed real estate agents, a practical guideline looks like this:

• 25% to 30% of net profit if you’re a moderate earner
• 30% to 35%+ of net profit if you’re in higher income brackets
• Add your state tax rate on top if you live in a state with income tax

The mistake many agents make is setting aside a percentage of gross commissions without accounting for business expenses first. Taxes are calculated on net profit (after deductions), so your true percentage should be based on what’s left after expenses.

Frequently asked questions (FAQs)