Every year, I have the joy of helping people across so many different areas of life:

• Newly married couples who need guidance on taxes and new careers

• Seniors looking to shield themselves from the increased tax burden

• New business owners are looking to properly plan for taxes and proper bookkeeping techniques.

• Seasoned business owners who know how to make money but need someone to handle it all, from bookkeeping, tax advising, and tax preparation.

But in all of these, there are always situations I think many of us can learn from to make better decisions and better plan for the future. I am going to do my best to share the stories and then give my opinion below

“Still Working at 72… and Getting Taxed on Social Security”

The Situation

I had a client this season, a really sweet 72-year-old woman, come to me to handle her federal and Louisiana taxes.

She’s still working at Walmart, making about 32K a year, because where she lives is expensive and she can’t afford to stop working. She’s renting, she doesn’t have much in retirement, so working isn’t really optional for her; it’s necessary just to get by.

As I started going through her return, I saw that because of her income level, a large portion of her Social Security was being taxed, in her case, close to that 80 to 85 percent range. She had no idea it could even happen, so there was confusion and frustration right away.

Then, digging a little deeper, it looked like her previous preparer hadn’t been reporting her Social Security benefits at all in prior years, which isn’t correct under the law. So now, not only is she dealing with the reality that it's taxable, but it also feels inconsistent with what she experienced before.

So from her perspective, it feels like something is wrong, or like she’s being treated unfairly, when really it’s just everything catching up at once.

My Opinion

“To me, this isn’t really a tax problem; it’s a combination of poor guidance over time and lack of planning.

Yes, the prior preparer's handling of Social Security is part of the issue. But the bigger picture is that there was never a real conversation around how her income, Social Security, and lack of retirement all work together.

And to be clear, I don’t think this is her fault. She made the best decisions she could with the information she had. But when people don’t fully understand their tax situation, it usually leads to frustration and sometimes even anger when the outcome doesn’t match expectations.”

How to Address It Going Forward

Going forward, this is where proper planning makes all the difference.

First, it’s about education, making sure she understands how her income affects her Social Security taxation, so there are no more surprises.

Second, it’s about putting a plan in place year to year so we can manage the outcome rather than react to it.

And the bigger picture, this is why retirement planning matters so much. Because situations like this don’t just happen overnight, they build over time.

The goal now is simple: give her clarity, give her a plan, and make sure she’s never in the dark about her situation again.

Horror Story: 40K Tax Bill from Doing It Themselves

The Situation

“I had a couple come to me this season who now both work regular W2 jobs, but they used to run a business starting back in 2019.

From 2019 up until now, they have been doing their own taxes using FreeTaxUSA, just trying to save money and handle it themselves.

Over time, they ended up owing about 40K in back taxes, and it’s still growing with interest because they never set up a payment plan or really addressed it.

When I started digging into their returns, I saw something pretty concerning. Even though the business was only in one spouse’s name, they were reporting the income twice, basically once under each spouse.

So they were paying tax on the same income two times.

On top of that, based on the records they actually had, they weren’t taking a lot of deductions they should have been. Things like home office, mileage, and other normal business expenses just weren’t being fully captured.

So not only were they double-reporting income, but they were also missing opportunities to reduce it.”

My Opinion

“This is a perfect example of how trying to save money up front can end up costing way more in the long run.

The issue here wasn’t just a small mistake; it was years of compounding errors. Double reporting income alone is a huge problem, and then you stack that with missed deductions and no real strategy, and it just snowballs.

And again, I don’t think they were trying to do anything wrong. They just didn’t fully understand how to report it correctly, and tax software doesn’t always catch that.

But this is where DIY taxes can get dangerous, especially when you have a business involved.”

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How to Address It Going Forward

“Now the focus is on fixing what we can and putting structure in place.

The first step is to go back and amend returns where appropriate, correcting double-reported income and capturing the deductions they should have taken. Based on what I saw, at a minimum, they should owe significantly less, potentially closer to half of what they’re at now.

Second, getting them on a proper plan with the IRS so the balance stops getting worse and they can actually manage it.

And going forward, making sure everything is reported correctly, deductions are tracked, and they’re no longer guessing about their taxes.

Because situations like this don’t happen overnight, they build year after year when there’s no clear guidance.”

Horror Story: Doing the “Right Thing” and Still Losing 6K a Year

The Situation

“I had a couple come to me making about 140K a year in California.

Because of her student loans, they file married filing separately to keep her payments lower, which makes sense from a loan strategy standpoint.

She claims the kids on her return and gets herself pretty close to net zero when everything is said and done.

But then, when I looked at the full household picture, they’re losing about 6K a year on the tax side.

Most of that is coming from him. His withholding is off, and he’s not set up properly for the situation they’re actually in.

And on top of that, since they’re in California, a community property state, income and taxes are essentially split 50/50, which adds another layer of complexity that they weren’t accounting for.”

My Opinion

“This is a good example of doing one thing right, but not coordinating everything else around it.

Filing separately for student loan purposes can absolutely make sense. But when you do that, you lose certain tax benefits, and you have to be very intentional with how everything else is set up.

In this case, it looks like his W-4 is still set up as if they’re filing jointly with kids, even though he’s not the one claiming them. So his withholding isn’t matching reality.

And when you combine that with California community property rules, it creates a mismatch that costs them every year.

So again, not really a tax problem, it’s a lack of coordination between tax strategy, withholding, and long-term planning.”

How to Address It Going Forward

“Going forward, this just needs to be tightened up.

First, his W-4 needs to be corrected so his withholding reflects their filing status.

Second, we need to account for California community property rules and make sure income is being planned for properly between both of them.

Third, they should be using retirement accounts more intentionally. A 401K for him and a 403B for her can help bring down taxable income, especially in a high tax state like California.

And most importantly, this is something where you run the numbers ahead of time. Filing separately might still be the best move, but you don’t guess on that. You plan it out so you’re not losing money every year.”

Horror Story: When Business Owners Grow… But Don’t Plan

The Situation

“One big pattern I saw this year was with newer business owners.

A lot of them actually did better than they expected in 2025, which is great, but most of them were still in that 50K range and didn’t really understand what comes with it.

I had several people come in who had no idea they were supposed to be making quarterly tax payments, and they weren’t setting anything aside for taxes at all.

So they made money, felt good about it, and then tax season hits, and now they owe and aren’t prepared.

I also saw people jumping into S Corps way too early, like businesses only making 4K a year, trying to run an S Corp when it doesn’t really make sense yet.

Then, on the flip side, I had married couples where both spouses are working in the business, but the LLC is in only one person’s name. In a state like Florida, that means they’re not both getting credit toward Social Security the way they could if it were structured properly, such as in a partnership.

And another big one, people coming in with just bank statements, expecting everything to get cleaned up and filed before April 15th.

At that point, the year is already over. If the books aren’t right, there’s only so much that can be done.”

My Opinion

“To me, this all comes down to a lack of understanding of what it actually means to run a business.

Making money is one part of it, but taxes, structure, and bookkeeping are just as important.

A lot of people are either getting advice from the wrong places, moving too fast into things like S Corps, or waiting too long and expecting everything to be fixed at tax time.

And the reality is, tax season is not the time to fix these problems. That work has to be happening throughout the year.”

How to Address It Going Forward

“Going forward, it starts with getting the basics right.

Understanding that if you’re making money, you need to set some of it aside and make quarterly payments.

Making sure your business structure actually matches your income level and situation, not just doing something because you heard it saves taxes.

If you’re married and both work in the business, make sure it’s set up in a way that benefits both of you long-term.

And most importantly, keep your books clean throughout the year, so when tax season comes, you’re not trying to rebuild everything from scratch.

Because at the end of the day, the goal is to be in control of your numbers before the year ends, not scrambling after it’s already over.”

Wrap Up

“When I look back at this tax season, none of these situations were really about bad people or even bad intentions.

They were all just people trying to do their best, but without the right information or a real plan.

And that’s the common theme across all of this.

Waiting until tax season to figure things out is where the problems start. By then, most of the decisions are already made, and you’re just dealing with the outcome.

Whether it’s someone working at 72 and getting surprised by Social Security taxes, a couple who accidentally created a 40K problem trying to do it themselves, or business owners making money but not understanding what comes with it, it all comes back to the same thing.

Lack of planning.

The goal isn’t to be perfect. It’s just to be proactive.

Have a plan before the year ends. Understand how your decisions affect your taxes. And make sure everything is working together, not against you.

Because tax season shouldn’t be a horror story.

It should just be confirmation that your plan worked.”

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But eventually, something breaks:

• You owe way more in taxes than expected

• Your books are a mess

• Cash flow feels unpredictable

• You don’t actually know if you’re profitable

And when that moment hits, most owners ask:

“Do I need a bookkeeper? A CPA? A tax person?”

The real answer is:

You need different financial help at different stages of your business.

This is the financial growth ladder, and I am overjoyed to take you through it. If something doesn’t stand out or you have further questions, you can always comment below for an answer!

The 4 Types of “Accountants” (And What They Actually Do)

Before we talk about stages, we need to clear something up: not all “accountants” do the same thing. In fact, some do only one of these, while others, like my firm, do several!

1. The Bookkeeper — The Record Keeper

A bookkeeper is responsible for:

• Categorizing transactions

• Reconciling bank accounts

• Keeping QuickBooks clean

• Producing monthly reports

They do not:

• Do an advanced tax strategy

• Represent you to the IRS

• Help you make big financial decisions

A bookkeeper makes sure your numbers are accurate. and you get the basic reports you need to understand business health but they do not typically perform forward thinking financials only look at the past numbers.

*This is by far the first support many business owners need in their business, or at least take free training on. If you are just starting in your business, please, please go find some videos or QuickBooks courses to learn how to properly keep your books.

2. The Tax Preparer — The Filer

A tax preparer:

• File your tax return for your business or personal returns

• Ensures compliance

• Have an IRS PTIN number and sometimes an EFIN (passed background check and their business can electronically transmit returns)

• Helps you avoid filing mistakes

• Is Unlicensed (EAs and CPA’s are the federal version of licensed tax professionals)

They often:

• Work seasonally

• Are dual-purpose (Insurance agents, Immigrant support offices, etc.)

• Focus on filing, not strategy

• Are unlicensed, so cannot represent you in front of the IRS

• Will not help you with forward-thinking tax strategy (but some will)

A tax preparer helps you stay compliant—but not necessarily optimized. In fact if you find a Tax preparer who will act like the roles below for tax strategy then i can almost gurentee they will become either an EA or CPA soon! Many Stay here and set up bandit signs, some want better and become/Earn the roles below.

*Some states, such as California, require even unlicensed preparers to take a course or other form of training or insurance, but most require nothing beyond an IRS PTIN to perform tax preparation services.

3. The Enrolled Agent (EA) — The Tax Strategist

An EA is licensed by the Internal Revenue Service.

They can:

• File taxes

• Provide a tax strategy

• Represent you before the IRS

• Handle audits and tax issues

• Do everything a CPA can do in the tax world; they are tax-specific specialists who work hard and take several federal exams to get their License.

• Can prepare Tax Returns in all 50 states.

An EA is a tax specialist who helps you reduce taxes and solve problems. This is the highest Tax specific license in the country.

*This is the exact license I am working on this year, and one any real preparer strives to be. Many think CPAs are the only good tax people to go to; wrong. EAs can do everything a CPA can do before the IRS, and while a CPA is a very hard and high achievement, it is a rounded Accountant license; EAs are licensed specifically in Taxes.

4. The CPA — The Financial Expert

A CPA can do everything an EA does, plus:

• Financial reporting

• Audits

• High-level advisory

• Complex structuring

They’re typically used by:

• Larger businesses

• Companies with investors

• Businesses needing formal financials

A CPA is the most advanced but not always necessary early on.

* There are CPAs at so many different levels. There are some that are discount services and some that won't serve clients who make less than 1 million per year. Everyone should strive to the point where they need a CPA to run their business, and by this point, you probably need someone to become a fractional CFO. Meaning someone who runs your business inside and out financially and can give you real, forward-thinking advice.

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The Small Business Financial Growth Ladder

Every business moves through predictable stages.

As revenue grows, financial complexity increases, and so should your financial support. But be careful: at each stage, it may be tempting to spend on the next; make sure you are consistent in revenue before making the jump.

Also, all of the stages below are things I have gone through or have seen my clients experience.

Stage 1: Startup ($0 – $100k)

At this stage:

• You’re doing everything yourself

• You may be using spreadsheets

• Transactions are simple

Your biggest risks:

• Filing taxes incorrectly

• Missing deductions

• Disorganized finances

Who you need:

• Tax preparer (minimum)

• Optional basic bookkeeping (I recommend any free training you can find online and a good bookkeeping software like QuickBooks)

At this level, survival matters more than optimization.

Stage 2: Early Revenue ($100k – $350k)

This is where things start breaking.

You’ll notice:

• Your books are messy

• You don’t trust your numbers

• Tax season gets stressful

• You’re guessing at profits

• You are bleeding money somewhere, potentially unknown to you

Who you need:

• Bookkeeper (non-negotiable)

• Experienced Tax Preparer, preferably an EA

Why:

Clean books start saving you money and time.

Once you cross $100k, guessing is no longer sustainable. I also advise you to seek advice from Your Tax Person to advise on wether S Corp status makes sense (it probably does but you need to do it right and be guided)

Stage 3: Growth Stage ($350k – $750k)

Now your business is real and expensive.

You’ll feel:

• Higher tax bills

• Confusion about structure (LLC vs S-Corp), if not addressed already, or feeling the pain from bad choices earlier in your career.

• Questions about how to pay yourself

• Possibly paying yourself too much or not enough

• High need for a real tax plan to avoid those high IRS bills

Who you need:

• Bookkeeper

• Tax advisor (EA or CPA)

This is where strategy begins.

At this level, tax planning can save thousands sometimes tens of thousands.

Stage 4: Scaling Business ($750k – $2M)

This is where complexity explodes.

You’re dealing with:

• Payroll

• Cash flow pressure

• Hiring decisions

• Growth planning

Who you need:

• Bookkeeper

• EA or CPA

• Fractional CFO / controller-level support (this means whoever you use needs to be meeting with you at a minimum monthly, tax advising quarterly, and showing you all your blind spots)

What changes here:

You stop asking:

“Did I make money?”

And start asking:

• Where is my money going?

• How do I continue to scale profitably?

• Who do I need to hire?

Around $1M, financial strategy becomes just as important as sales. you cannot get past the next barrier making the financial mistakes you were before. You need a plan and a good one at that.

Stage 5: Strategic Business ($2M+)

At this level:

• You’re optimizing, not surviving

• Decisions have a bigger financial impact

• Growth is intentional

• potentially looking at selling the business or an exit strategy

Who you need:

• Full financial stack

• CPA

• CFO-level leadership

• You need all stops pulled

Finance becomes a competitive advantage. Are you building to sell or exit? How does that look for your life? Should you start buying some competitors legally or looking at buying buinsesses that can support activities in your current business? I could write a whole articel alone on this stage.

The Mistake Most Owners Make

They hire the wrong help at the wrong time.

Examples:

• Hiring a CPA when they just need clean books

• Using only a tax preparer when their books are a mess

• Waiting too long to get strategic help

The correct order is:

1. Clean books

2. Tax strategy

3. Financial leadership

If you skip step one, everything else breaks.

What This Looks Like in Practice

To make this more tangible, here’s an example of how financial support is often structured as a business grows.

This is based on how I currently organize my own service levels, but more importantly, it reflects what many small businesses naturally need at each stage.

Level 1 — Bookkeeping (Foundation)

Typical revenue range: $100k–$350k

At this stage, the focus is on:

• Keeping books clean and up to date

• Monthly reconciliations

• Reliable financial reports

This level is about building a foundation.

If your numbers aren’t accurate, nothing else works.

Level 2 — Bookkeeping + Tax Strategy

Typical revenue range: $350k–$750k

As the business grows, support usually expands to include:

• Ongoing bookkeeping

• Basic tax planning throughout the year (not just filing)

• Guidance on things like estimated payments and structure

At this level, businesses are no longer just tracking money; they’re starting to manage it more intentionally.

Level 3 — Bookkeeping + Strategy / CFO-Level Support

Typical revenue range: $750k–$2M

Once complexity increases, businesses often need:

• Deeper financial analysis

• Cash flow planning and forecasting

• Regular financial check-ins or strategy discussions

• Help with making higher-level decisions

At this point:

The numbers become a tool for decision-making not just a record of what already happened.

Why this matters:

Most business owners don’t need everything from day one.

But they do need the right level of support for their current stage.

And as the business grows, that level naturally evolves.

Final Thought

Every business eventually becomes a finance business.

Not because you want it to

But because:

• Cash flow determines survival

• Taxes determine profitability

• Decisions determine growth

The businesses that win in the long term aren’t the ones that avoid financial help.

They’re the ones that bring in the right help at the right time.

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“If you are reading this and find yourself in this situation, I want you to know the world is not ending, you have the chance to move past this and take it one bite-sized piece at a time.” - Cameron Hodge

Many small business owners fall into a trap of not knowing how to do their taxes or prepare them. What I find is that one small slip-up, either not preparing for the tax they may owe or forgetting to do their tax return one year, causes them to just continue this terrible trend.

People assume:

• The IRS is about to take serious action

• Penalties will be overwhelming

• It’s too late to fix the problem

• They’ve already made things worse by waiting

Because of that fear, many business owners delay dealing with it.

Ironically, the delay is often what makes the situation feel bigger than it actually is.

In reality, most tax situations are far more manageable than people think once they understand what actually matters and what doesn’t.

What Matters Most if You’re Behind on Taxes

Filing Your Tax Return Matters More Than Paying Immediately

One of the most common misunderstandings about taxes is the belief that you shouldn’t file a return unless you can pay the full balance. For most situations, that’s the opposite of what you want to do.

The IRS generally cares more about filing accurate returns than receiving full payment right away.

When a tax return is filed:

• Failure-to-file penalties stop increasing

• The IRS can see your actual tax liability

• Payment plans become available

If a return isn’t filed, the IRS system may eventually create a substitute return, which usually assumes no deductions and often overstates the tax owed.

For many business owners, simply filing the missing returns is the most important first step.

Getting Your Bookkeeping Organized

When business owners fall behind on taxes, the real issue is usually not the tax return itself.

It’s the bookkeeping.

If income and expenses haven’t been tracked consistently, preparing the return becomes difficult because the financial picture isn’t clear.

Clean bookkeeping allows you to:

• Identify legitimate business deductions

• Avoid paying tax on income that was actually spent on business expenses

• File returns faster

• Understand what you truly owe

I have helped many business owners this past year with cleaning up their books. I know many cannot afford even my services and I want you to understand that that's OK. There's so much free information out there to do it properly.

Keeping proper bookkeeping sometimes and most of the time, can save you thousands of dollars and unnecessary taxes because you actually spent on IRS allowed deductions.

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Understanding The Tax You Owe

Another key step is determining the real numbers.

Many people assume their tax debt is extremely large because they are unaware of penalties and interest.

But until the returns are prepared, the exact balance usually isn’t clear.

Once returns are filed, you can see:

• the actual tax owed

• the penalties

• the interest

Only then can you decide the best way to resolve the balance. Let me share a real situation I ran into this tax season:

A husband and wife who run a small business have been doing their own taxes since 2019. At face value, this sounds fine. I will never tell someone, especially in this country, that they can't do their own taxes!

But guess what, they didn't fully understand that they needed to keep proper books, so not only were they not taking enough deductions, they were double-reporting the income, as only she was the actual owner, due to bad advice they had received when starting their business.

This caused them to have an IRS tax bill of $40,000 because they were taking their business income and double-reporting it. For those, I don't understand: it's like having a business income of 100,000, reporting almost no business expenses, but then, even in TurboTax, accidentally saying that that hundred grand was made by both of you and your spouse, making it look like 200,000 to the IRS.

The moral of this story is a simple amendment of prior returns allows you to only owe the IRS what you legally actually owe. I cannot stress enough that proper bookkeeping and reporting of income matters more than winging it.

What Usually Matters Less Than People Think

Being Late on Taxes

Many small business owners assume that filing late automatically means they’re in serious trouble.

In reality, millions of late returns are processed every year.

The IRS has procedures designed specifically for late filings.

There may be penalties, but in many situations, they are manageable and sometimes eligible for reduction depending on the circumstances.

Being behind on taxes is not ideal, but it is also far more common — and more solvable — than most people realize.

Not Knowing Exactly What You Owe

Uncertainty often causes the most stress.

Business owners feel stuck because they don’t know the exact tax balance they’re facing.

But you don’t need perfect information to begin fixing the situation.

The most important pieces to organize are:

• total business income

• business expenses

• missing tax filings

Once those are addressed, the numbers become much clearer.

Waiting until everything feels perfectly organized often just delays progress.

Thinking It’s Too Late to Fix

One of the biggest mental barriers is the belief that the situation has already gone too far.

In practice, many tax issues that feel overwhelming are resolved once the process starts.

It’s common to see business owners who avoided dealing with taxes for years because they assumed the situation was beyond repair.

Then once the bookkeeping is organized and the returns are filed, the path forward becomes straightforward.

The biggest challenge is usually starting the process, not the resolution itself.

The Practical Steps to Get Back on Track

If you’re a small business owner who is behind on taxes, the process of getting back on track usually follows a simple order.

1. Catch up on your bookkeeping so income and expenses are organized.

2. Prepare and file missing tax returns.

3. Determine the actual tax balance owed.

4. Explore payment options if a balance remains.

Resolving tax issues rarely happens overnight, but once these steps begin, the situation usually becomes far more manageable.

Why This Happens to So Many Business Owners

Most entrepreneurs start their businesses focused on what they do best:

serving clients, building products, or growing their services.

Taxes and financial systems are often learned later.

Without early guidance, bookkeeping and tax planning can fall behind as the business grows.

That doesn’t mean the situation can’t be corrected.

With organized records and accurate filings, most tax situations can be addressed step by step.

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A messy year-end leads to:

• missed deductions

• higher taxes

• inaccurate reports

• and a stressful spring

This guide keeps everything simple, clean, and stress-free. I am going to walk you through exactly like I would if you had my team and me running your books for you.

1. Reconcile All Bank + Credit Card Accounts

Start here. Everything else depends on it.

Make sure you’ve reconciled:

• business checking

• business savings

• credit cards

• PayPal / Venmo Business

• Stripe / Square deposits

• any loans or lines of credit

Look for:

• duplicates

• missing transactions

• errors in the feed

• outdated connections

👉 If your reconciliation isn’t clean, every report and tax figure will be off.

2. Verify All Income (Don’t Wait for 1099s)

1099s don’t arrive until late January — and sometimes they’re wrong.

Before the year ends:

• match deposits to your invoices

• double-check payouts from clients, brokerages, platforms

• Review Stripe, PayPal, Venmo Business, and Square activity

• create a list of who should send you a 1099-NEC

This prevents underreporting or overreporting income, which can trigger penalties or audits.

3. Clean Up & Categorize All Expenses

This is one of the most significant opportunities to save money.

Audit your categories:

• Meals vs. Entertainment

• Travel (must have a business purpose)

• Subscriptions & software

• Insurance premiums

• Education & training

• Equipment + phone/computer purchases

👉 Misclassified expenses = missed deductions.

👉 Uncategorized expenses = deductions lost forever.

How We Do Year-End Books for Our Clients

(Here’s your insider look behind the scenes — and how to apply this to your own books.)

A. We start with the right software

We use QuickBooks Online for almost every client because it’s reliable, audit-proof, and connects to nearly all banking platforms.

Clean software → clean data → clean taxes.

B. We connect every business account

This includes:

• checking & savings

• credit cards

• payment processors

• payroll accounts

• loans

And yes — we regularly find mixed personal and business expenses.

It happens to everyone.

We clean it up and help you prevent it from going forward, because the IRS and your legal protection suffer when mixing personal and business. Dont Do It!

C. We categorize every transaction properly

Every dollar in or out of your business gets labeled accurately.

We track:

• expenses

• owner draws/distributions

• owner contributions

• loan principal vs. interest

• refunds

• new assets/equipment

Accuracy here = accurate deductions.

D. We attach receipts for documentation

Our preference: every transaction includes a receipt.

Our minimum standard: anything over $75 must have a receipt.

This protects you and keeps your books audit-ready.

E. We reconcile month-by-month

We compare every account against the bank statements from January → December.

This ensures:

• no missing transactions

• no duplicates

• correct balances

• accurate reports

Most DIY bookkeeping breaks at this step — and that’s why year-end gets stressful.

F. We generate clean year-end reports (and monthly for our top clients)

Depending on your business, this may include:

• Profit & Loss (mandatory)

• Cash flow reports

• Spending summaries

• Balance sheet

• Owner compensation analysis (for S-Corps)

These reports drive:

• tax preparation

• quarterly tax planning

• business strategy

• your income goals for 2026

Your tax return is only as good as the books behind it.

4. Update Your Mileage Log

Quick and simple:

• Add missing trips

• Add business purpose

• Clean it up while it’s fresh

Mileage is one of the biggest deductions self-employed pros miss. especially those who travel a lot.

5. Review Owner Draws, Loans & Credit Card Payments

A few reminders:

• Owner draws are not expenses

• Loan principal is not deductible

• Loan interest is deductible

• Credit card payments should not be double-counted

Clean books reduce IRS red flags.

6. Make Year-End Adjustments

Only include what’s needed:

• depreciation

• bad debt write-offs

• inventory adjustments

• clearing the “Ask My Accountant” pile

These ensure your P&L reflects true business performance.

7. Pull a Clean Profit & Loss for 2025

Your P&L helps you:

• estimate your April tax bill

• analyze spending

• spot red flags

• plan for next year’s revenue goals

If your P&L doesn’t make sense, reply — I’ll help interpret it for you.

Closing Thoughts

A clean set of books isn’t about being perfect — it’s about being profitable.

Do these steps before December 31 and you’ll walk into tax season calm, prepared, and in control.

Your future self (and your tax bill) will thank you. and if you need someone to handle your year end cleanup for you, simply hit the button below, head to our website and schedule a meeting or give us a call!

Schedule A Meeting

A Realistic Wealth Plan for Agents Netting $120K+

⚠️ Disclaimer

This article is for educational purposes only and reflects what has worked for me personally as a licensed REALTOR® and tax professional. Everyone’s financial situation is different — income, dependents, state laws, and goals all vary.

Before making decisions about tax structure, investments, or retirement plans, consult a qualified tax advisor, financial planner, or attorney who understands your personal situation.

👋 The Scenario

You’ve done it — you’ve built the business.

You’re closing deals consistently, clearing over $120K a year after expenses, and finally feeling like you’re winning.

But if you’re being honest, most of that money still moves faster than it stays. You pay taxes late, cover family needs on the fly, and don’t have a long-term plan for where your income’s going.

You’ve been playing defense.

Now it’s time to play offense — to turn income into wealth.

This is a real, no-fluff guide for agents ready to shift from survival mode to strategy. Each step includes what I personally did at this stage — not a one-size-fits-all plan, but a framework to help you start yours.

🧱 Step 1: Organize Your Money Like a Business

Goal: Stop guessing where your money goes.

Let’s say you gross $220K and net $130K after expenses.

Set up three accounts:

1. Operating (50%) – for business expenses and marketing.

2. Tax (25%) – for quarterly payments and payroll taxes.

3. Personal (25%) – your “paycheck.”

If you’re still Schedule C:

→ Use these splits monthly to simulate payroll and smooth cash flow.

If you’re an S Corp:

→ Pay yourself a reasonable W-2 salary (say $60K) and take the rest as distributions — potentially saving $7K–$10K annually in self-employment tax.

💬 Consistency wins. Wealthy agents don’t “wing it” — they automate it.

What I Did:

When I first hit consistent six-figure income, I used Relay Bank to automatically split deposits into tax and personal accounts after every commission. It wasn’t fancy, but it built control and discipline — two things I’d lacked early on.

💼 Step 2: Build Your Tax Structure Before You Scale

Goal: Stop overpaying and start planning.

If your net income has held above $100K for two years, it’s time to:

• Elect S Corp status.

• Run payroll through Gusto or QuickBooks Payroll.

• Meet quarterly with a tax professional to project and plan.

💡 Your tax plan is your first investment plan.

What I Did:

I’ll be honest — I made my S Corp election too early, before my income and systems were consistent. I thought it made me “look official.” Instead, I ran into IRS penalties and headaches because I didn’t fully understand payroll, distributions, and how to handle taxes from my own business account.

Timing is everything. If I could do it again, I’d have waited one more steady year, built cash reserves, and then made the move with better systems in place. Now, I recheck that setup annually with my accountant to make sure it fits my current stage — not just my ambition.

📊 Step 3: Know Your Real Numbers

Goal: See where your money truly goes — not what’s in your bank.

Monthly routine:

1. Review your Profit & Loss report.

2. Calculate your profit margin (target 50–60%).

3. Review your top 3 spending categories.

4. Compare to last month’s numbers.

If you don’t know your net until tax time — you’re managing blind.

📈 You can’t build wealth on guesses.

What I Did:

In my early years, I didn’t review my books monthly — only at tax time. Once I started using QuickBooks Online and reviewing my P&L every 30 days, my entire mindset shifted. Seeing my numbers helped me make better marketing decisions and stay ahead on taxes instead of scrambling.

🛡️ Step 4: Secure Your Family and Lifestyle

Goal: Before investing, make sure your base is protected.

You’ve earned the right to breathe — now make life sustainable.

If you have kids or a spouse:

→ Get term life insurance (10–12x annual income) and disability coverage for at least 60% of your pay.

If you’re renting but financially stable:

→ Consider buying a primary residence for both stability and tax benefits.

If your car’s unreliable or unsafe:

→ Upgrade within reason — this is about safety, not flash.

The point isn’t lifestyle creep; it’s family security.

🔑 Stability is the foundation that makes real investing possible.

What I Did:

For years, I thought “grind season” was what success required. Social media told me to outwork everyone — and I did. But the cost was high. I put my family on the back burner while I chased a moving target.

By 2023, we had tens of thousands in avoidable debt, no margin, and no peace. I was sprinting toward nothing, convincing myself it was progress.

It wasn’t until I gave my life to Christ in 2024 that things started to shift. I realized I wasn’t building wealth — I was building exhaustion.

The fact my wife stayed through that season is a miracle in itself. Today, every financial decision starts with one filter: does this honor my family and the life we’re building together?

My True next goal? I want to retire my mother-in-law and hire my sister-in-law to give her a better life with a career she loves.

Faith gave me focus. And focus gave me a foundation.

💰 Step 5: Build Wealth Where You Have the Advantage

Goal: Invest strategically — in what you understand.

You don’t need complicated investments or “expert-only” products. You already have an advantage: you understand real estate.

Start where you know the landscape.

Example Paths

• For retirement growth: Open a Roth IRA or Solo 401(k). Automate $500–$1,000 per month into low-cost index funds (like VTSAX or VTI).

• For active income: Use your real estate experience to buy small buy-and-hold rentals (2–4 units). Focus on cash flow, not hype.

• For families: Double your retirement advantage — two Roth IRAs, one for each spouse, compounding every year.

📈 Agents already live and breathe real estate — that’s your unfair advantage. Use it.

What I am Doing:

I focus on investing $14,000 across two Roth IRA accounts (mine and my wife’s), both in VTSAX, for long-term growth and simplicity. Mainly because i dont have time to worry about what stocks are best, its’s not my area of genius.

I had also built a small rental portfolio early on — but during my “bad realtor year,” I sold every property just to cover expenses. It was one of the hardest lessons of my career.

Now that my business has stabilized, my partner and I are rebuilding our buy-and-hold portfolio starting next year — focusing on 2–4-unit properties with solid cash flow and appreciation potential. The goal: long-term stability through real estate we actually understand.

🔚 Final Word

You’ve already proven you can sell. Now it’s time to build.

At $120K+ net, income isn’t the problem — direction is. The next level of your success isn’t about working harder; it’s about making your money work harder for you.

Start by protecting your family, mastering your numbers, and investing where you know the terrain.

That’s how agents stop surviving commission to commission and start building generational wealth.

But after reviewing dozens of agent returns — from rookies to retirees — I keep seeing the same tax mistakes. These aren’t minor errors either; they often cost agents thousands in overpaid tax or missed deductions.

Here are the top 8 tax issues I see (and how to fix them).

1.

Not Knowing When to Itemize or Take the Standard Deduction

Too many agents default to itemizing because it “feels” more professional — but the math often says otherwise.

For 2025, the standard deduction is $15,750 (single) and $31,500 (married filing jointly).

If your itemized expenses — mortgage interest, property tax, medical bills, charitable donations — don’t exceed those amounts, you’re better off taking the standard.

I’ve seen agents lose money by forcing itemization when the standard deduction would have saved them more.

✅ Fix it: Always compare both totals before filing. Let the math decide, not the myth.

2.

Poor or No Mileage Logs

Mileage is one of the biggest write-offs for agents — but it’s also one of the most abused.

I see agents claiming 10,000+ miles a year with no log, or misunderstanding who can even take the deduction.

If you’re a Schedule C sole proprietor, you can deduct business mileage.

If you’re an S corporation, you can’t deduct it directly — the company must reimburse you using an accountable plan and mileage log.

✅ Fix it:

Use an app like MileIQ or QuickBooks Self-Employed, or track miles in a simple spreadsheet. Record start, stop, and business purpose. No log = no deduction.

3.

Choosing the Wrong Vehicle Deduction Method

There are two main ways to write off your vehicle:

• Standard mileage rate (70¢ per mile for business in 2025)

• Actual expenses (fuel, maintenance, insurance, depreciation, etc.)

Once you choose one method for a vehicle, you’re generally locked into it — and choosing wrong can cost you thousands.

Agents with high mileage usually benefit from the standard rate, while those with heavier, newer vehicles might save more using actual costs.

✅ Fix it: Run the numbers both ways early in the year and stick with what saves you more. Keep all receipts either way.

4.

Not Separating Business and Personal Expenses

Mixing business and personal money makes taxes messy — and expensive.

When income and expenses run through one personal account, agents often miss deductions or lose proof they need later.

✅ Fix it:

Open a dedicated business checking account (even if you’re a sole proprietor).

Deposit all commission income there and pay business expenses from that account. It’s simple, clean, and keeps your write-offs audit-ready.

5.

Delaying an S Corp Election and Overpaying Self-Employment Tax

This is one of the most significant tax leaks I see for agents earning $80K–$150K+.

As a sole proprietor, you pay 15.3% self-employment tax on all net income.

With an S corp, you can split income into:

• A reasonable salary (subject to payroll tax), and

• Distributions (not subject to self-employment tax).

✅ Fix it:

Talk with a tax pro once your net income hits around $80K+. The right timing on an S corp election can easily save $5K–$10K per year in taxes. Just make sure you use payroll software and choose the proper separation between reasonable salary and distributions.

6.

Not Setting Up Retirement Accounts

Many agents think, “I’ll do that later.” But later never comes.

A Roth IRA lets you grow money tax-free — a huge long-term advantage.

S corp owners can also establish their own Solo 401(k) or SEP IRA, which not only builds retirement savings but also reduces taxable income now.

✅ Fix it:

Even a small start counts.

• Roth IRA: up to $7,000 contribution (2024)

• Solo 401(k): up to $23,000 (plus $7,500 catch-up if over 50)

These add up fast — and your future self will thank you. Also, this is just an example; please consult your financial advisor on what's best for you, not just on taxes alone.

7.

Ignoring Quarterly Taxes (Until It’s Too Late)

If you earn commissions year-round, the IRS expects you to pay taxes as you go. Missing quarterly payments leads to late-payment penalties, even if you pay in full at year-end.

✅ Fix it:

Follow the Safe Harbor Rule — pay either:

• 90% of this year’s expected tax, or

• 100% of last year’s total (110% if income > $150K).

As a simple rule of thumb:

• Under $100K gross: set aside 20–25% of each check.

• S corp: closer to 30%, to include payroll taxes.

I had a CPA when I got started, extended my corporate tax return 2 years in a row (each filing season), and I (the idiot new agent) was not advised that I needed to pay CA tax properly. This caused me 3K in penalties, which I had to figure out quickly to avoid more fees.

8.

Believing You Can Be “Audit-Proof”

There’s no such thing as zero audit risk — sometimes it’s just random selection.

But solid documentation and consistent systems make audits a non-issue.

✅ Fix it:

Keep receipts, maintain logs, and file clean returns.

The IRS can question your deductions, but they can’t argue with good records.

💡 Final Word

If you’re still handling your own taxes, that’s okay — it’s a great way to learn your numbers, and most agents, who are not capping, I think, should do their own if they are comfortable doing it.

But as you grow, those small mistakes compound. Clean books, proper setup, and proactive planning can mean the difference between breaking even and keeping thousands more every year.

I help agents do exactly that — from tax prep to entity strategy and quarterly tax plans — all designed for people who live off commissions.

Helping families and agents keep more of what they earn.

📞 Ready to stop guessing on your taxes?

Let’s build a tax plan that fits your business and cash flow.

Book a free intro call →

Disclaimer: For educational purposes only. Not legal or tax advice. Consult your own professional before making tax decisions.

Every commission check feels like freedom — until tax season hits and the IRS (and your state) come calling.

Most agents are independent contractors, meaning no one withholds taxes for you. If you don’t plan, that next “big check” can turn into a big surprise.

The good news? You can soft calculate your tax set-aside each time you get paid and stay ahead of your quarterly payments — no spreadsheets required.

🧮 Step 1: How to Soft-Calculate Your Tax Withholding

Your tax withholding depends on two key factors:

1️⃣ Your business structure (sole proprietor vs. S-Corp)

2️⃣ Your state’s income tax rate

🧾 Federal + State Combined Rule of Thumb

Payroll covers part of taxes, but the total effective rate ≈ is 30%

💡 Pro Tip: Don’t forget state taxes.

California can easily add 8 – 10% to your total tax rate.

Florida agents, for example, enjoy no state income tax, so they can safely stay within the 20–25% range. Also, if you are earning more than 60K Net in your pocket, please consider setting up an entity and electing to be taxed as an S corporation.

💰 Example

You close a $10,000 commission in California:

• 25% set-aside = $2,500 → move it immediately to a separate “Tax Savings” account.

• Use a bank like Relay or a high-yield business savings account to hold your tax reserves safely.

🧠 The Tax Pro Advantage

A tax professional can help you build a tailored tax plan — using advanced tools to project your exact quarterly and year-end tax targets.

That means no guesswork, no overpaying, and no “surprise bills” at the end of the year.

🗓 Step 2: Mastering Quarterly Taxes

If you’re self-employed, you must pay taxes as you earn income — not just once a year.

Quarterly payments keep you compliant and prevent IRS penalties.

🧾 Self-Employed (Schedule C) Agents Pay

• Income tax (federal + state)

• Self-employment tax (Social Security & Medicare) is 15.3% on top of income taxes.

• Due dates: Apr 15 · Jun 15 · Sep 15 · Jan 15, I.E you make income during the quarter, you need to make an estimated tax payment at least equal to what you paid last year in total taxes, more on this below to avoid penalties.

🏢 S-Corp Owners Pay

• Payroll: Taxes are taken monthly or semi-weekly on your “reasonable salary.” Also, to clarify, you essentially pay the 15.3% self-employment tax here, but it is part of payroll; the self-employment tax and payroll taxes exist to cover FICA (like social security, etc.). Income tax also applies here as well.

• Distributions: Estimated income tax is paid quarterly on leftover business profits (distributions) you pay yourself with, which avoids the 15.3% self-employment tax and is only taxed based on income tax (this is what you pay quarterly on with your S-Corp, since payroll is covered when you receive a check). This is the true benefit of an S-Corp because a portion of your income can avoid the self-employed tax.

⚖️ Safe Harbor Rule (Don’t Miss This)

To avoid underpayment penalties, meet either test:

• Pay 90% of your current year’s tax, or

• Pay 100% of last year’s tax (110% if AGI > $150K, which means if you earned more than 150K in the previous year)

Even if income spikes mid-year, staying within safe harbor keeps you penalty-free.

Pro Tips:

1. To know your safe harbor on Form 1040 (personal tax return), look at line 24. This is your tax payment before credits and refunds. Even if you got money back, you must pay this number throughout the year to avoid a penalty.

2. S Corp owners, to know your safe harbor, depends on the state its in. Most states the taxes flow to your personal return so you just need to look at your 1040, but for example, in California, every company owes $800 or 1.5% of business income each tax year, so make sure you understand your state’s laws to follow their safe harbor rules.

🧰 Top Payroll Tools for Agents & S-Corps

• Gusto → clean, automated payroll + tax filing

• QuickBooks Payroll → perfect if you already use QBO

Both handle deposits and W-2/941 filings automatically — compliance without stress. Please do not do the payroll yourself; use a tool.

💵 Step 3: Cashflow & Survival Tips for a Seasonal Business

Real estate is not a steady-paycheck business — income swings with the market.

Smart agents build systems that survive slow months.

🪣 1. Build a “3 – 4 Month Survival Fund”

Keep 3 – 4 months of business + personal expenses in reserve.

If expenses = $5,000/mo → reserve = $15K – $20K.

This fund covers marketing, MLS fees, and personal bills when closings slow.

💳 2. Avoid “Early Commission” Loans

Commission-advance companies charge heavy fees (often 20 – 30%).

Instead, rely on your own reserves — your future self will thank you.

🔁 3. Automate Your Accounts

Set up three:

1️⃣ Operating – business income & expenses

2️⃣ Tax – 20 – 30% set-asides

3️⃣ Reserve – emergency + slow-season fund

Move tax money the day your commission hits. Treat it like rent — non-negotiable.

📈 4. Pay Yourself a Consistent “Salary”

Even if you’re not an S-Corp, pay yourself weekly, bi-weekly, monthly, quarterly. Pick one and make it consistent.

It builds predictability and helps with budgeting and loan qualifications.

🌦 5. Expect the Seasons

Most agents earn 60 – 70% of income between March and September.

Plan ahead:

• Save extra during the busy season.

• Keep marketing steady during Q4 – Q1.

• Review taxes quarterly with your pro to adjust targets early.

🧭 Bottom Line

Your taxes aren’t scary when you control your cash flow.

Setting aside 20 – 30%, following safe-harbor rules, and building reserves gives you stability in an unpredictable business.

Treat your real estate income like a business, and your taxes become part of your wealth plan.

*📬 Commission Keeper

Helping agents master money, taxes, and long-term wealth.

For educational purposes only. Not legal or tax advice.* for exact advice send me an email at cameron@superdadtax.com or a call/text at 321-321-1901.

Episode Summary

In this episode, Cameron breaks down the essential tax knowledge every real estate agent should understand — not to become an accountant, but to become a better advisor to clients. From the home-sale exclusion and short-sale forgiveness to 1031 exchanges and depreciation rules, Cameron explains what every agent should know before closing deals, buying rentals, or advising clients with complex tax questions.

He also dives into new 2025 updates, including the raised SALT deduction limits, clean-energy credits, and how smart retirement and HSA contributions can save both agents and clients money. Whether you’re a brand-new agent or a seasoned broker working with investors, this episode gives you the foundation to talk taxes with confidence and connect your clients with the right professionals.

“Seniors don’t lose money because they’re careless. They lose it because they trust whoever raises a hand to ‘help.’”

Every month, I meet elderly homeowners who are fixing bad tax returns — often because someone who meant well didn’t understand the rules.

The story is almost always the same:

• A lifetime homeowner sells the family house.

• The preparer misreports the sale.

• A massive, avoidable tax bill shows up.

It’s not fraud — it’s bad guidance.

And for seniors, it can cost more than money — it costs peace of mind.

As Realtors, we can either close the deal or protect the legacy. The best do both.

The Hidden Tax Pitfalls for Senior Sellers

Here are the biggest mistakes I see, what causes them, and how you can spot the warning signs as a real estate professional.

1. Missing the Home Sale Exclusion

The rule:

Homeowners can exclude up to $250,000 (single) or $500,000 (married) of gain on the sale of their primary residence if they’ve lived there at least 2 of the last 5 years.

How seniors lose out:

• They’ve moved into assisted living or rented out the home too long.

• A surviving spouse misses the 2-year window to use the $500,000 exclusion.

• The preparer marks the sale as an “investment property.”

Agent tip:

Ask early: “When did you last live in the home full-time?”

If it’s been more than three years, pause before listing and suggest a tax review.

2. Forgetting the Step-Up in Basis

The rule:

When a homeowner dies, their heirs receive a step-up in basis — meaning the home’s cost resets to its current market value.

If sold soon after, there’s little or no taxable gain.

How families lose out:

• Titles were never updated after a spouse’s death.

• Children sell too soon without verifying the step-up.

• The property wasn’t in a living trust, forcing probate delays and confusion.

Agent tip:

Remind families that a simple trust can prevent future tax headaches and simplify title transfers.

3. No Record of Cost Basis

The rule:

Taxable gain = sale price − cost basis (purchase price + improvements).

How seniors lose out:

• They’ve lost decades of receipts for remodels, additions, or repairs.

• Their preparer “guesses.”

• Improvements that should’ve raised basis — and reduced tax — go unclaimed.

Agent tip:

Add “Gather home improvement records” to your pre-listing checklist.

Every $10,000 in missed basis = roughly $1,500 in unnecessary tax.

4. Gifting Homes to Children Too Early

The rule:

When property is gifted, the recipient inherits the original basis — not the stepped-up basis they’d get if they inherited it at death.

How families lose out:

• Parents “add kids to the deed” to avoid probate, triggering partial gift tax and losing the step-up.

• When the kids sell, they owe tax on decades of appreciation.

Agent tip:

Always pause when title changes are discussed.

Say: “Before you record this, let’s have your tax or estate advisor review it.”

5. “DIY” or Pop-Up Tax Preparers

The problem:

Seniors often file with whoever offers to “help.” These preparers may be unlicensed, undertrained, or simply careless.

How it hurts:

• Missed exclusions.

• Misreported proceeds.

• Double taxation on depreciation.

• Missed senior tax credits or property exemptions.

Agent tip:

Keep a short referral list of EA- or CPA-level tax professionals who actually understand real estate.

How Realtors Can Step Up

You don’t have to be a tax expert — just the connector who cares enough to ask the right questions.

Here’s your framework:

Start the “Tax Talk” Early

Include tax planning in your pre-listing conversation:

“Before we decide on price or timing, have you reviewed the sale with your tax advisor?”

Encourage Trust and Estate Planning

A revocable living trust isn’t a luxury — it’s protection:

• Avoids probate

• Preserves step-up in basis

• Prevents confusion for heirs

• Keeps family wealth intact

Keep the Family Involved

When adult kids live out of state, miscommunication can ruin deals.

Invite them into the discussion early.

Build Your Senior Sale Team

Create a referral circle of:

• Estate attorneys

• Tax pros

• Financial planners

  You become the quarterback, not the technician.

The Bigger Picture

Seniors are trusting people — they come from an era when business ran on handshakes.

But today’s financial landscape punishes blind trust.

Every home sale involving an elderly client is more than a transaction — it’s a transfer of legacy.

The Realtor who slows down, asks questions, and connects clients to qualified professionals isn’t “overstepping.”

They’re doing what the industry should’ve been doing all along.

“Real estate isn’t just helping people move — it’s helping them transition safely.”

Subscribe to Commission Keeper — where Realtors learn how to talk taxes, trusts, and client care in plain English.

Disclaimer

For educational purposes only. Not legal or tax advice. Always consult a qualified professional before making financial or estate decisions.

These insights are for educational purposes only. You’re welcome to share them as talking points with your clients, but every taxpayer’s situation is unique — always remind clients to confirm what applies with a qualified tax professional (hey, that’s where I come in).

💬 Why This Topic Matters

Most agents stop helping when the deal closes. The ones clients remember — and refer — are those who can say:

“By the way, here are a few tax moves to check on before the end of the year.”

These 2025-ready tips are practical, IRS-approved, and simple to bring up in conversation. You don’t need to be a CPA to sound informed — know the basics and guide clients to verify with their tax pro.

Below you’ll find the most impactful year-end tax strategies for the 2025 filing season, clearly marked for whether they help most homeowners or primarily higher-income clients who itemize.

1. 🏠 Home Sale Exclusion — “The Tax-Free Profit Rule (and What About Forgiven Mortgage Debt?)”

What it is: When a client sells their primary residence, up to $250,000 (single) or $500,000 (married filing jointly) of gain can be excluded from taxes if they’ve lived there for at least 2 of the last 5 years.

Who benefits: ✅ Almost everyone — this applies even if the taxpayer takes the standard deduction. It’s one of the most powerful homeowner benefits in the tax code.

Realtor tip:

“If you’ve owned and lived in your home at least two of the last five years, you might not owe tax on hundreds of thousands in profit when you sell.”

Perfect reminder for sellers sitting on high equity or planning a 2025 move.

⚠️ What About Short Sales, Loan Forgiveness, or Foreclosures?

When a mortgage lender forgives part of a homeowner’s debt — whether through a short sale, loan modification, or foreclosure — the IRS can treat that forgiven amount as “cancellation of debt income” (CODI).

Ordinarily, that means it would appear as taxable income on the homeowner’s return. But there’s an essential temporary exclusion still in effect:

The Qualified Principal Residence Indebtedness (QPRI) exclusion allows taxpayers to exclude forgiven mortgage debt on their primary home from income if the discharge occurs before January 1, 2026.

This means that for 2025 only, homeowners who have a portion of their mortgage forgiven on their primary residence can still avoid having that forgiven balance treated as taxable income — provided they meet all IRS requirements.

After 2025, unless Congress renews it, that exclusion expires, and any forgiven mortgage balance could once again become taxable.

Realtor talking point:

“If a client goes through a short sale or has mortgage debt forgiven, that amount can be taxable — but under current IRS rules, they may qualify to exclude it from income if it happens before 2026. It’s crucial they talk to a tax professional before signing final paperwork as other deductions/calculations may have to be used or required to be taken.”

2. ☀️ Energy Efficiency & Clean Energy Credits

What it is: Two key credits remain strong for 2025:

• Energy Efficient Home Improvement Credit: 30% of qualifying upgrades (insulation, windows, doors, HVAC) up to $1,200 per year.

• Residential Clean Energy Credit: 30% of the cost for solar panels, battery storage, or geothermal systems.

  Who benefits: ✅ All taxpayers — credits reduce taxes dollar-for-dollar, regardless of standard or itemized deduction.

  Realtor tip:

“That new HVAC or solar install could earn you a 30% tax credit. That’s a direct reduction in what you owe, not just a write-off.”

3. 🏡 Mortgage Interest Deduction

What it is: Interest on mortgages up to $750,000 (for loans originated after Dec 15, 2017) can be deducted if the taxpayer itemizes deductions.

Who benefits: 💼 Primarily higher-income homeowners with larger mortgages or high state taxes.

Realtor tip:

“If your mortgage and property taxes are large enough, ask your CPA whether itemizing might save you more than the standard deduction.”

4. 🏢 Depreciation for Investment Properties

What it is:

Depreciation lets rental property owners recover the cost of buying, building, or improving their properties over time. The IRS treats a property as wearing out or losing value each year, even if it’s actually appreciating.

That means owners can deduct a portion of the property’s cost every year — a “non-cash” deduction that directly lowers taxable income.

Who qualifies as an investor:

• ✅ Individual landlords who personally own a house, condo, duplex, or ADU they rent out.

• ✅ Accidental landlords who moved and kept their old home as a rental.

• ✅ Short-term rental hosts who rent a second home or part of their primary residence.

• ✅ LLCs or partnerships holding property strictly for rental or investment.

  The key is intent: if it’s rented or available for rent to earn income, the owner qualifies.

How it works:

• Residential rental property is depreciated over 27.5 years; commercial property over 39 years.

• Only the building (and certain improvements) depreciates — land does not.

• Improvements that add value or extend useful life — such as new roofs, kitchens, HVAC systems, or flooring — are depreciated, while routine repairs (fixing a leak, painting) are expensed immediately.

• The deduction starts when the property is placed in service (ready to rent), not when it’s purchased.

Example:

A client buys a rental for $400,000, with $80,000 allocated to land and $320,000 to the structure.

$320,000 ÷ 27.5 years = about $11,636 per year in depreciation they can deduct — even if the property cash-flows positively.

Why it matters:

Depreciation is often what turns a small profit into a “paper loss,” reducing or even eliminating taxable income from rentals.

• Investors who actively participate can deduct up to $25,000 of those losses against other income if their AGI is under $100 K (phasing out by $150 K).

• High-income investors can carry forward unused losses to future years or offset other passive income.

Watch out for recapture:

When the property is sold, the IRS “recaptures” the depreciation — meaning the total deducted reduces the property’s basis and can create taxable gain at a maximum 25 % recapture rate.

Smart investors plan ahead with cost-segregation studies or 1031 exchanges to defer that tax.

Realtor tip:

“Even one rental can unlock thousands in paper deductions. Encourage your investor clients to track improvement costs, keep depreciation schedules current, and review options before selling — that’s how you help them keep more equity long-term.”

5. 🔁 1031 Exchange — Deferring Capital Gains

In plain English:

A 1031 exchange allows an investor to sell one property without paying taxes on the profit immediately, as long as they use the money to purchase another investment property.

Instead of giving 20–30 % of their gain to the IRS, they roll that equity straight into their next deal.

💡 The Simple Concept

Think of it like a trade-up program for investors.

They sell one property, quickly buy another, and tell the IRS,

“Don’t tax me yet — I’m reinvesting in real estate.”

Taxes are deferred, not erased — but they can keep deferring again and again, which helps them grow wealth faster.

👥 Who Can Use It

Any client who owns property for rental, investment, or business can do a 1031 — even if it’s just one rental.

It does not apply to:

• Their main home

• A vacation home that they use personally most of the time

🏠 “Like-Kind” Means Easier Than It Sounds

“Like-kind” means both properties are real estate in the U.S. used for investment.

So they can trade:

• A single-family rental → a duplex

• Vacant land → a small apartment building

• A warehouse → another commercial unit

They don’t have to be the same type — just both held for investment.

⏰ The Two Big Deadlines

1. 45 days to identify the new property (in writing).

2. 180 days to close on that new property.

If either deadline is missed, the whole exchange is disqualified, and taxes come due.

💰 Key Rule — Don’t Touch the Money

The seller can’t hold or deposit the sale proceeds.

They must go through a Qualified Intermediary (QI) — a neutral third party that handles the funds between closings.

📊 Quick Example

Your client sells a rental for $600 K and has $200 K in gain.

If they buy another qualifying property within the rules, that $200 K is not taxed now.

It simply transfers into the new property, keeping all their equity working.

📈 Why It Matters

1031 exchanges help investors grow their portfolios faster because they allow reinvestment of pre-tax dollars.

When done repeatedly, it can compound wealth for decades.

If the investor later passes the property to heirs, they often get a step-up in basis, wiping out those deferred taxes completely.

🧰 Realtor Tip

“If your client owns or plans to sell a rental, ask early if they’ve heard of a 1031 exchange.

They’ll need to set up the Qualified Intermediary before closing — not after.

Knowing this rule can literally save them tens of thousands in taxes and make you the agent who saved the deal.”

🧭 Bonus Tip for Agents

Add “1031 exchange potential” to your listing notes whenever you meet an investor-type client.

It shows you understand their financial goals and keeps you positioned as the go-to Realtor for serious investors.

6. 💸 Property Tax & SALT Deduction — What’s New for 2025

SALT stands for State and Local Taxes — mainly the property taxes homeowners pay, plus either their state income tax or state sales tax.

What it is (old rule):

State and local taxes (SALT) — like property taxes, state income, or local sales taxes — were deductible only if taxpayers itemized deductions, and capped federally at $10,000 total (for 2018–2024).

Big change in 2025:

Under the One Big Beautiful Bill Act (OBBBA), beginning with the 2025 tax year, that $10,000 limit is temporarily raised to $40,000 (for most filers) through 2029.

• The $40,000 cap will increase by ~1% per year in 2026–2029.

• However, for taxpayers with modified adjusted gross income (MAGI) over $500,000, the allowed SALT deduction is phased down — but not below the original $10,000 floor.

• This increase is temporary — starting in 2030, the cap reverts to $10,000 (unless Congress acts).

What “phase-down” means (high earners):

If a client’s MAGI exceeds $500,000, their SALT benefit is reduced by 30% of the excess amount over $500,000 (but never below $10,000).

Who benefits under new rule:

• ✅ Homeowners in high-tax states who previously hit that $10,000 SALT ceiling.

• ✅ Those with moderate-middle incomes in states where state + property taxes exceed $40,000.

• ⚠️ High-income clients (above the MAGI threshold) may see limited benefit due to phase-down.

• 🚫 W-2 clients in lower-tax states (whose SALT payments are < $10K) may see little change.

State workarounds (PTE / pass-through entity):

Many states already offered PTE / “pass-through entity tax” options. Under those, a business (LLC, S-Corp) pays state tax at entity level, and owners deduct it on the business return, avoiding the SALT cap.

Under OBBBA’s final version, these state-level SALT workaround programs continue — the law doesn’t block or limit them.

Realtor tip (say this to your clients):

“For 2025, the federal limit on SALT deductions is up to $40,000 — but that benefit phases down if your income is over $500,000. If your state offers a pass-through entity tax option for businesses, that may still help bypass caps. Be sure to check with your tax pro before year-end.”

Why this matters for Realtors:

• Many homeowners in high-tax states felt handcuffed by the old $10,000 cap — now you can mention they may finally itemize more.

• But because the benefit is income-sensitive and temporary, you should always add the disclaimer that clients confirm eligibility with their tax advisor.

• Remember: this is one of those topics where merely mentioning it as a possibility boosts your value — you don’t need to get into phase-down math.

7. 💰 Retirement & HSA Contributions — The Easy Win Most Clients Forget

What it is:

Retirement accounts and Health Savings Accounts (HSAs) let W-2 clients and self-employed buyers reduce their taxable income while building long-term savings. You don’t have to explain the details — remind clients to check that they’ve contributed as much as they can before year-end.

2025 contribution limits:

• IRAs (Traditional or Roth): up to $7,000 per person ($8,000 if age 50 or older).

• 401(k), 403(b), or TSP plans: up to $23,000 per person, plus an extra $7,500 catch-up if age 50 or older.

• HSAs: $4,300 for self-only coverage or $8,600 for family coverage, plus a $1,000 catch-up if age 55 or older.

  (The IRS may make minor final adjustments before filing season.)

Who benefits:

Nearly every W-2 homeowner or buyer who qualifies for these accounts, especially middle-income families, is looking to trim their taxable income.

Contributions reduce taxes whether or not the client itemizes deductions.

Realtor tip:

“Remind clients to review their 401(k), IRA, or HSA contributions before December 31. It’s an easy way to save on taxes while planning for the future.”

Why it matters:

Mentioning simple tax-savings reminders shows clients you care about more than just closing a sale — you’re helping them think like long-term homeowners and investors.

8. 🧾 Keep Those Closing & Renovation Records

What it is: Home improvements increase cost basis, which lowers taxable gain when the home is sold. Many sellers lose deductions because they didn’t keep receipts.

Who benefits: ✅ All homeowners and investors.

Realtor tip:

“Keep every closing statement, contractor invoice, and big repair receipt. It could save you thousands when you sell later.”

9. 🚗 Mileage & Work-Related Travel (for Agents Themselves!)

What it is: For Realtors who are self-employed, the 2025 standard mileage rate is projected near 67¢/mile (final IRS rate will confirm). Keep a clean log — it’s one of the most audited deductions.

Who benefits: ✅ Every self-employed agent.

Realtor tip:

“Every showing, client meeting, and closing drive counts. Use an app to track mileage — small habits save big taxes.”

💼 How Realtors Can Use This Guide

• Use these as conversation starters at open houses, closings, or year-end client check-ins.

• Always follow with: “Of course, confirm this with your tax professional — but it’s worth asking about.”

• This builds credibility and trust, keeping you top of mind when they (or their friends) need a real estate + tax-savvy agent.

✳️ Closing

If you’d like a printable 2025 Realtor Tax Tip Sheet to share with your clients or team, hit reply and a message, and I’ll send you the branded version from Super Dad Tax / Commission Keeper — ready to make you look like the pro who knows how to keep more commissions and more clients.

Here’s everything real estate agents and brokers should know about taxes, wrapping up the 2025 year, as well as the general landscape we face being outside the W-2 world.

How the IRS Sees You: Self-Employed, Not an Employee

If you’re a licensed real estate agent or broker associate, you’re not an employee of your brokerage — you’re a self-employed independent contractor.

That means:

• You’ll receive a Form 1099-NEC for your commissions (not a W-2).

• No taxes are withheld from your commission checks.

• You’re responsible for both sides of Social Security and Medicare, known as self-employment tax (15.3 %). As a W-2 employee, your employer typically pays the employer portion.

• You can deduct legitimate business expenses to calculate your net earnings (income – expenses).

Think of it this way: your brokerage pays you gross income. The IRS sees you as running your own business.

Your Tax Responsibilities as a Self-Employed Agent

1. Federal income tax – based on your total taxable income.

2. Self-employment tax – 15.3 % on roughly 92.35 % of your net earnings.

3. State income tax – depends on where you live or earn income.

4. Estimated tax payments – since no one withholds taxes for you, you’re expected to pay as you go (hello, quarterlies).

💡 Example:

You earn $80,000 in commissions. After $20,000 in deductible expenses, your net income is $60,000.

You’ll owe:

• Federal income tax on $60,000 (after standard or itemized deductions)

• Self-employment tax on about $55,000 (≈ $8,400)

• Possibly state income tax

This is why agents who don’t set money aside for taxes get caught off guard at year-end — and why the IRS built the quarterly payment system.

💡 Fun Tax Fact:

Even if you file an extension past April 15 to submit your return, the IRS still expects you to pay what you owe by April 15.

Interest starts accruing the day after the original due date on any unpaid balance — even if you’ve filed Form 4868 and have until October for personal tax or August for business to turn in the paperwork.

Late-payment interest runs at the federal short-term rate + 3 % (compounded daily), and after 60 days you may also face a separate late-payment penalty of 0.5 % per month (up to 25 %).

👉 So while an extension buys you time to file, it does not buy you time to pay. SO always make sure you are your tax proffesional see if making an estimated payment while extending maxes sense for you.

Quarterly Taxes for Dummies (Real Estate Edition)

Reference: IRS

What Every Agent Needs to Know Before the IRS Comes Knocking

Most agents don’t think about taxes until April. But the IRS has a very different expectation: if you’re self-employed and expect to owe more than $1,000 in tax for the year, you’re supposed to pay quarterly estimated taxes.

That means four times a year — April, June, September, and January — the IRS expects a check. If you also don't pay 100% of last year’s taxes or 110% if your prior year income was high, this also means you pay a penalty come tax time. Additionally, depending on the state, you may also owe them.

Scary? It can be. But let’s break down what it really means for you as an agent or broker.

Why the IRS Wants You to Pay Quarterly

Employees with W-2 jobs have taxes withheld from their paychecks. Agents on 1099s don’t — which makes you responsible for paying as you go. The IRS doesn’t like waiting until April for your money, so they requires estimated payments throughout the year.

Miss those? You risk incurring underpayment penalties, even if you pay in full by April 15.

Who’s Supposed to Pay (Technically Everyone)

According to the IRS, you need to pay quarterlies if:

• You’re self-employed and expect to owe $1,000 or more after credits/withholding.

• You don’t have enough taxes withheld elsewhere (spouse’s W-2, second job, etc.).

That means nearly every full-time real estate agent and broker is subject to this rule.

👉 Scary reality: If you’re making commissions and no one is withholding, the IRS expects quarterlies.

When It Actually Makes Sense

Here’s the truth: many newer agents making under $50K–$70K net income don’t pay quarterlies — and they usually don’t get hit hard. Penalties are relatively small, and cash flow is often tight in the early years.

But once you’re consistently netting above that threshold, ignoring quarterlies becomes dangerous:

• You risk big April tax bills that wreck your cash flow.

• Penalties grow as income grows.

• It’s usually around this exact point that an S-Corp election makes sense — which changes how you handle taxes entirely.

S-Corp vs. 1099: What Changes

• As a 1099 self-employed agent, You’re 100% responsible for quarterlies.

• As an S-Corp: You pay yourself a W-2 salary with tax withholding built in. That covers most of your liability.

• Distributions from the S-Corp may still require extra tax payments, but you can often adjust your W-2 withholding to avoid quarterlies altogether.

👉 Rule of thumb: If you’re earning enough that quarterlies start to matter, you’re probably also ready to discuss an S-Corp. Click here to read my article on whether an S Corp should be formed.

Should You Be An S-Corp?

What If You Operate as a Partnership?

How Team Leads, Partners, and Co-Owners Are Taxed

Sometimes two or more agents team up — maybe to share marketing costs, pool assistants, or operate under a team name. If you open a joint business account or share income formally, the IRS treats you as a partnership by default.

That means:

• You’ll file an annual partnership return (Form 1065).

• Each partner receives a Schedule K-1 reporting their share of the profits or losses.

• Each partner pays taxes individually on that income — even if the partnership doesn’t distribute cash.

The Upside

• Easier to split expenses and income transparently.

• Can formalize team arrangements and prevent disputes.

• Allows joint ownership of assets or marketing systems.

The Cautions

• Partnerships add complexity and cost — you now have a separate tax return.

• Each partner owes self-employment tax on their share of income.

• You must have a clear partnership or operating agreement to define profit splits, responsibilities, and exit terms.

• Liability can still pass through to individuals unless you register as an LLC partnership or elect another structure.

When It Makes Sense

• When two or more agents truly co-own the business or brand.

• When a broker requires a registered entity for team operations.

• When income is significant enough that you can afford bookkeeping and legal support.

When It Doesn’t

• If you’re simply sharing office costs or referring clients — a written expense-split agreement is usually simpler.

• If one partner is mostly inactive, a contractor relationship is cleaner or have them as an agent on your team with a specific split and roles.

💡 CFO Tip: Once a partnership starts earning serious money (say $100 K+ net), it’s often worth exploring an S-Corp election for the partnership or converting to multiple S-Corps under one umbrella to reduce self-employment tax and better protect profits.

How to Make Quarterly Payments

1. Use Form 1040-ES for federal estimated payments found here.

2. Pay via IRS Direct Pay, EFTPS, or through your IRS account online, found here.

3. For your state: use your state’s payment portal (check with your state tax authority).

4. 2025 due dates are (for estimated federal taxes):

     • April 15, 2025

     • June 16, 2025

     • September 15, 2025

     • January 15, 2026 (final for late-year income)

5. Use safe harbor rules to avoid penalties: paying 100 % of last year’s tax (or 110 % if your prior income was high) is often sufficient to avoid a tax penalty.

Smart Year-End Moves & Tax Strategy for Agents

Cleaning Up the Books (High-Level Recap)

You should already be:

• Reconciling all accounts

• Categorizing expenses properly

• Storing receipts (especially for big-ticket items, marketing, staging)

• Tracking mileage & home office usage

If there are gaps, fix them now — clean books are your foundation.

Strategic Deduction Timing

Don’t just spend arbitrarily. Use your tax planning to shift expenses into this year when it makes sense. Some ideas:

• Prepay ad credits or marketing services that you’ll use early next year (receipts trigger deduction now).

• Early licensing/education registrations for the next year.

• Equipment, supplies, and software you planned to acquire—do it now to lock in the deduction.

• Retirement contributions are often the most beneficial deductions. Funding or maxing out a Solo 401 (k), SEP IRA, or other plans is a high-leverage tax strategy.

These moves do more than reduce tax — they shape your business and wealth.

Pro Tip: Do not Spend just to spend, if you werent going to spend the money many times it isnt worth any tax savings compared to what you spend.

Using Projections & Advanced Planning

This is where professionals truly separate themselves. As your tax advisor, here’s what I can do for you (beyond just preparing your return):

• Import last year’s return and match with your year-to-date numbers.

• Model what if scenarios (more closings, equipment purchases, S-Corp election) to see how your tax liability shifts.

• Identify moves you can make before year-end to lower your current year’s tax (or reduce your tax burden in April).

• Help set up quarterly estimates, withholding strategies, and S-Corp salary structure so next year isn’t a scramble.

When you work with someone who uses these tools, tax planning becomes a forward-looking strategy — not just a filing task.

When to Hire Help

You don’t need complex professionals in Year 1, but as things scale, your team matters:

• Bookkeeper: to maintain clean and accurate records.

• Tax professional/advisor: for projections, strategy, and reducing surprises.

• CFO (Typically a CPA): When you operate multiple entities, handle multi-state work, or want audits/reviews.

• Financial advisor/planner: for turning your earnings into long-term wealth.

My Experiene as a fellow Realtor:

Bookkeeper: Using somoneone that understands this business we are in as Agents is impartant to track numbers properly and effectivly for your business.

Tax Proffesionals: Just because someone is a CPA doesnt always make them the best with tax (mind you I am on my way to become a CPA so I hold them at the most knowlewdgable in accounting), this is why many CPA’s in tax also get their EA (enrolled agent) and many more will become attornys who understand Tax law to represent you against the IRS. Likewise any proffesional who does your taxes is helping you comply with what you owe, not helping you advise on next year taxes (this is a whole different arena, one I work in everyday)

Financial Advisors: This isnt shade, as many great men and woman work in this field but remember like us as Agents most work with brokers who pottentially can limit what products they can show you. So like everyone else make sure to find the right fit for your situation.

Final Thoughts

Taxes are no longer a fear — with the proper knowledge and planning, they become a minor obstacle.

This 2025 guide is your map. Use it to:

• Know what the rules are for your business model

• Make informed, strategic moves before year-end

• Step into next year with confidence, not dread

If you’re ready to go deeper (projections, S-Corp setup, or smart withholding), just hit reply or schedule a meeting with me below.

Schedule A Call With Super Dad Tax

Disclaimer as always my friends:

This article is for educational and informational purposes only and should not be considered legal, tax, or financial advice. Tax laws and thresholds can change each year and may vary by state. Always consult a qualified tax professional or advisor who understands your personal situation before making financial decisions.

But here’s the truth: Bookkeeping is more than just paperwork. It’s the foundation of your financial decision-making. Done right, it turns you from “just an agent” into the CFO of your own business.

In this playbook, I’ll show you how to go from zero bookkeeping knowledge → to knowing your numbers, tracking ROI, and making CFO-level decisions about where your time and money actually pay off.

Step 1: Get Your Foundation in Place

If you’re going to do this right, you need the right tool.

QuickBooks Online is the gold standard for agents. It connects directly to your bank and credit cards, automatically pulls in transactions, and makes reporting simple. I've used many other tools. I know that for newer agents, it can be a cost to add, but I promise you, there's no better solution once you start making a consistent income.

Keep your banking structure simple but separate:

• Business Checking → Deposit every commission check here.

• Business Credit Card → pay for marketing, MLS dues, gas, staging, supplies. (or use another checking account, cash is king here)

• Tax Savings Account (Optional) → transfer a % of each commission for future taxes, make sure you work with a tax professional to understand your tax basis.

💡 CFO takeaway: Clean separation = clean numbers. Clean numbers = clarity. I also recommend looking into the profit-first method for most of you. It's an effective method for managing cash flow, and I receive nothing in return. Look up the book on Amazon. Additionally, for those of you who want to implement it in one of the banks, consider Relay. I will say, though, if you are trying to do physical checks, this bank may not be the best.

Step 2: Set Up Categories That Matter to Agents

QuickBooks uses a “Chart of Accounts” — basically, folders for your money.

Here’s a streamlined version that works for most agents:

• Income: Commissions, Referral Fees

• Expenses: Marketing/Advertising, Vehicle/Mileage, MLS Dues, Education/Licensing, Home Office, Meals, Supplies, Professional Services (staging, photographers, accountants), any category of item you spend money in.

Keep it lean. Too many categories = clutter.

💡 CFO takeaway: Use categories that drive deductions and decisions. Below you will see the chart of accounts I use in my business as an example.

Step 3: Learn the 3 QuickBooks Sections That Matter

Don’t get lost in menus. You only need three areas:

1. Transactions → the inbox for your money. Categorize weekly.

2. Chart of Accounts → your filing system for income/expenses.

3. Reports → where the insights live. Top reports below 👇

📊 The Core Reports Every Agent Should Know

• Profit & Loss (P&L): Shows total income vs. expenses → the clearest picture of whether you’re actually profitable.

• Balance Sheet: A snapshot of what you own (assets) vs. what you owe (liabilities). Helpful as you scale into bigger investments or financing.

• Cash Flow Report: Tracks how money moves in and out of your business. This is how you avoid “I’m busy but broke.”

• Expense by Vendor/Payee: Quickly see where your money goes (MLS, marketing vendors, gas, etc.).

• Profit by Tag/Class (Deals or Lead Sources): This feature lets you see ROI per property or lead source when you’ve tagged/classed correctly in QuickBooks.

• Accounts Receivable Aging (if applicable): If you ever extend credit or track unpaid invoices (rare for agents, but useful if you also run side businesses).

💡 CFO takeaway: Focus on the reports that matter. Ignore the noise. QuickBooks offers numerous features, many of which do not apply to small businesses in the service industry.

Step 4: Track ROI With Tags (Your CFO Secret Weapon)

Tags (or Classes in QuickBooks) let you see what’s really working in your business.

• Deal Tags: Example → 123 Main Street Sale. Connect every expense and income tied to that deal.

• Lead Source Tags: Example → Zillow Leads vs Open Houses.

By year’s end, you’ll know:

• Which deals gave you the highest ROI?

• Which lead sources are worth keeping (and which to cut).

💡 CFO takeaway: Tags turn your books into a GPS for growth. As agents, we can't just track total deals; we also need to track which source of our leads is generating the most revenue to determine where our efforts should be focused. You be surprised to find sources that are giving you low leads, but the ROI is extremely high. Even if it's from paid ads, sometimes you need lean into what's working during the season.

Step 5: Know the Numbers That Matter

You don’t need every metric. Just track the ones a CFO would ask about:

• Net Profit: Are you really making money after expenses?

• Marketing ROI: What’s the return on each lead source?

• Cash Reserves: Do you have at least 2–3 months of business expenses covered?

💡 CFO takeaway: If you can answer these three questions, you’re ahead of 90% of agents. Those of us that run Teams know you live in the numbers.

Step 6: Build a CFO Rhythm

Bookkeeping isn’t a once-a-year task. It’s a rhythm:

• Weekly: Categorize transactions, apply tags (classes in QuickBooks).

• Monthly: Run Profit & Loss, check ROI.

• Quarterly: Review lead sources and adjust spending.

• Annually: Prep full-year reports (tax season should now feel easy).

💡 CFO takeaway: Rhythm creates confidence. Sidenote: Additionally, for every month, compare your bank statements with QuickBooks to identify and correct any accounting errors.

Closing Thought: From Agent to CFO

Bookkeeping is more than a tax prep chore. It’s your business advantage.

Episode Summary

In this week’s episode of The Commission Keeper Podcast, Cameron Hodge — Marine Corps veteran, licensed REALTOR® in California and Florida, and owner of Super Dad Tax LLC — dives into what it really means to act as the Chief Financial Officer of your own real estate business.

Most agents focus on closing deals but overlook the importance of running their numbers like a business. Cameron shares stories from his early days in San Diego real estate, lessons learned from mentors, and step-by-step advice on setting up QuickBooks, separating accounts, and using reporting to make smarter decisions.

⸻

Key Takeaways

• Why every agent needs to think like a CFO, even if you’re a solo operator.

• The importance of separating business and personal finances with dedicated bank accounts.

• How to use QuickBooks Online to track income, expenses, and generate meaningful reports.

• What a Chart of Accounts is and how to set it up for real estate agents.

• Leveraging classes (tags) in QuickBooks to track ROI by lead source.

• The CFO rhythm: weekly transaction categorization, monthly P&Ls, quarterly ROI reviews, and year-end reconciliation.

• Common pitfalls agents make with money management — and how to avoid overspending on shiny lead gen strategies.

⸻

Resources & Links

• 📩 Subscribe to the newsletter: thecommissionkeeper.com

• 🧾 Learn more about bookkeeping & tax support: superdadtax.com

• 💬 Questions or topic requests? Email Cameron at info@superdadtax.com

⸻

Closing Thoughts

Being a great agent isn’t just about closing homes — it’s about building a business with staying power. By running your numbers, tracking expenses, and thinking like a CFO, you’ll set yourself up for long-term growth and financial freedom.

An S-Corporation is a business entity commonly established to minimize tax liability. In short, it’s an entity that most small business owners — especially real estate agents — should consider if they want to maximize their tax benefits.

But here’s the catch: many don’t fully understand the difference between simply forming an LLC or corporation and actually electing S-Corp status for tax purposes. Even before I got into the tax business, I personally received bad advice from professionals who didn’t explain when an S-Corp makes sense. Unfortunately, this is more common than you’d think — even some tax advisors miss the mark on corporation elections.

That’s why it’s important not to rely solely on someone else’s judgment. As a business owner, you need to understand the basics yourself so you can make the best possible decision. Choosing the wrong structure or not electing at the right time could cost you thousands of dollars in unnecessary taxes every single year.

Why Taxes Hurt So Much as an Agent

If you’re a real estate agent, you probably know the sting of taxes. Here’s why:

• As a sole proprietor (which most agents are when they start), you pay self-employment tax on all your net income, which currently is 15.3%.

• You also pay 12.4% on Social Security and 2.9% on Medicare.

💡 Example: If you net $100,000 after expenses, you’ll owe about $15,300 in self-employment tax — before income tax. That’s money straight out of your pocket.

What an S Corp Does Differently

An S Corporation is a regular corporation or LLC that elects S-Corporation status, which tells the IRS:

“Tax me as a pass-through. Don’t tax me at the corporate level. Let income flow to my personal return.”

Here’s the magic for Realtors®

• You must pay yourself a reasonable salary (through payroll, with W-2s and withholdings).

• Any profit left after salary can be taken as a distribution.

• Distributions are not subject to self-employment tax.

👉 That’s where the savings come in.

When an S Corp Makes Sense?

An S Corp isn’t for every agent; all numbers below are what you have in your business after yearly expenses:

• If your net income after expenses is less than $40,000, the setup and payroll costs usually eat the savings.

• Between $50,000 and $80,000, it may start to make sense.

• Once you’re consistently netting $ 100,000 or more, it’s often worth serious consideration.

⚠️ Agent Tip: Think of it this way — if you can save more in taxes than it costs you to run payroll, file the S Corp return, and keep up compliance, it’s worth exploring. If not, keep it simple.

The “Reasonable Salary” Rule

The IRS doesn’t let you pay yourself $10,000 and call the rest a distribution. They require you to pay a reasonable salary based on:

• What other agents in your market would earn in a similar role

• Your duties and hours worked

• Industry norms

💡 40/60 Rule of Thumb: Many tax pros suggest paying about 40–60% of your net income as salary and the rest as distributions. Example: If you net $100,000, a $60,000 salary and $40,000 distribution is often reasonable. It’s not official law, but it’s a safe guideline. Have I seen situations where distributions can be higher than above absolutely, but it's all situation-dependent.

⚠️ Pay too little → audit risk.

✅ Pay a fair salary → you’re in a safer zone

The Real Power Move: Retirement Savings

An S-Corp isn’t just about saving self-employment tax. It also unlocks bigger retirement contributions than you could make as a sole proprietor. Let’s look at two powerful options, but as always, consult your investment advisor:

Example 1: Roth IRA (After-Tax Growth)

• 2025 Limit: $7,000 per year ($8,000 if you’re age 50+)

• How it works: Contributions are made after tax. That means no deduction now, but your money grows tax-free, and withdrawals in retirement are also tax-free.

• Agent Example: If you earn $100,000 net income as an S-Corp owner, you could still contribute up to $7,000 into a Roth IRA (income phase-outs apply starting around $161,000 for single filers or $240,000 for joint filers in 2025).

👉 The Roth is about tax-free income later — great if you expect your retirement tax bracket to be higher.

Example 2: Solo 401(k) (Pre-Tax Contributions)

With an S-Corp, you’re both the employee and the employer. That means you can contribute on both sides:

• Employee contribution (your W-2 salary): Up to $23,500 in 2025 ($30,000 if you’re 50+).

• Employer contribution (your business): Up to 25% of your W-2 salary.

💡 Agent Example: Let’s say your S-Corp pays you a salary of $100,000.

• Employee side: $23,500 (pre-tax, reduces your taxable income now).

• Employer side: $25,000 (25% of the $ 100,000 salary).

• Total contribution = $48,500 in 2025.

That’s seven times more than a Roth IRA alone.

Example 3: Combining Roth IRA + Solo 401(k)

• Roth IRA (after tax): $7,000

• Solo 401(k) (pre-tax): $48,500

• Combined = $55,500 in retirement savings for 2025

Tax Savings From the Solo 401(k)

If you contribute the full $48,500 pre-tax into a Solo 401(k) and you’re in the 22% federal bracket, you could save about $10,670 in federal taxes this year — plus reduce your adjusted gross income (AGI), which may help with other deductions and credits.

👉 Agent Tip: The Roth IRA gives you tax-free money later, while the Solo 401(k) gives you tax savings today (plus the potential for massive compound growth). Many agents use both strategies to balance their tax bill now and in retirement.

Don’t Forget the 199-A Deduction.

The Qualified Business Income (QBI) deduction under current law allows many small business owners to deduct up to 20% of their qualified business income.

For agents, this means:

• Your distributions (the part not subject to payroll tax) may qualify for this deduction.

• Balancing salary vs. distributions properly can maximize both tax savings on SE tax and the QBI deduction.

• High earners: once your taxable income goes above the IRS thresholds (around $383,900 for married filing jointly in 2025), the deduction phases out.

👉 Translation: The S Corp strategy isn’t just about payroll tax savings — it’s also about positioning yourself to take advantage of this 20% deduction when possible.

The Responsibilities (Don’t Skip These)

Running an S Corp comes with rules:

• Run payroll → paychecks, withholdings, file quarterly IRS payroll forms (941), and W-2s at year end.

• File Form 1120-S each year and issue K-1s to yourself.

• File annual reports with your state.

• Keep a separate business bank account and track all expenses. (You should already do this when you're just self-employed)

• Stay on top of deadlines — missing filings risks penalties or even loss of S Corp status.

The Bottom Line for Agents

• S Corps save money by cutting self-employment tax — especially as your income grows.

• They unlock bigger retirement contributions, helping you keep more and build wealth.

• They may also help you maximize the 199-A deduction if you structure things correctly.

• But they require discipline and compliance.

If you’re hitting consistent six figures and you feel the tax pinch, an S Corp could be the most brilliant move you make this year.

👉 Just don’t DIY this. Partner with a tax professional who understands real estate agents and can help you decide if this is right for you today.

Schedule A Free Tax Consult

• Why self-employment tax hits agents so hard

• How an S-Corporation actually saves money

• The “reasonable salary” rule and the 40/60 guideline

• General overview of the retirement strategies agents can unlock with a Solo 401(k) or Roth IRA

• When making the switch really makes sense (and when it doesn’t)

Whether you’re just starting out or already netting six figures, this episode will help you understand if an S Corp is worth it for your real estate business.

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📩 Stay Connected

• Read the full newsletter here → Commission Keeper Newsletter

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📅 Work With Us

Want tailored advice for your real estate business? Schedule a free call with my tax & bookkeeping team at Super Dad Tax LLC:

👉 Book a Call Here

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👉 If you found this episode helpful, share it with another agent who’s tired of handing too much money to the IRS than they are legally required to provide.

• “Big commission checks feel great… until tax season or a slow quarter shows up. That’s the rollercoaster most agents ride.”

The Problem At Hand

As Agents and Brokers, we are constantly striving to beat our prior year goals, working to become the best version of ourselves and for our clients.

Also, like many of you, I myself have and am in your shoes. While I love growing my accounting firm to help our fellow agents, I am still actively working in CA and FL as an agent and soon-to-be co-team leader.

However, while our industry has numerous sources for acquiring more clients and serving them, I believe there is a lack of information on how to effectively utilize the money once earned, specifically to create lasting wealth.

I'm not sure about you, but I got started in this industry to change my family, to take control of my life, and build something that my future generations can benefit from.

Wear Your CFO Hat

Action Step: Block 30 minutes to review your last 12 months of commission/business income

Every large company in the world has a chief financial officer position; this is an individual who manages all financial aspects of a company, from income and expenses to tracking its tax burden, plus more!

This week, I want you to act as the CFO for your business. I’m sure if you’re a top producer you already do this, but sit down and look at your commission over the last 12 months and look at these things:

1. What was your Total Income? (minus expenses, taxes, and owner pay/salary)

2. Did you have to invest money in your business to cover expenses?

3. What % of total income was your Pay to yourself? Your expenses? Your taxes?

4. What type of leads generated the highest Rate of return on the money spent to attract them?

5. Did you have to take a higher Salary because of the increased lifestyle beyond basic needs?

I can tell you that, only when working with a Top team in San Diego as a brand-new agent, did I see a proper CFO act in the real estate team and address all of the above and more every month. Now let’s see what we can do with these numbers and knowledge 👇.

Break the Rollercoaster with a Commission Allocation Plan

While I would like to feel special that the CEO of Keller-Williams, EXP, or any famous agent in the country reads this newsletter, I know most of you are like me, hard-working and trying to build it big.

P.S. If you don’t have an accounting software and system to track your finances, and even the 10% of the basics I have above, then get your butt over to QuickBooks ASAP! Alternatively, you can have my Firm handle it for you, regardless of your success level.

Book A Call

One of the best systems I've found for managing finances in my real estate business is the profit-first method. Check it out here (I get nothing from this link) 👇

Profit First

I receive no compensation from you for clicking the profit-first link. I'm telling you as someone who had no one to really outline how a small business can have a system to manage finances. This answered all my questions.

Essentially, to sum it up, it's a system of categorizing your income into several buckets, such as taxes, expenses, owner’s pay, etc. Below, I have outlined how I currently separate my finances, along with a brief explanation for each. Mind you, this concept also involves several checking accounts, which not every institution will offer. Currently, I use Relay Bank again. I have no relationship with them other than that I use them for two of my businesses.

• 100% Income Checking (this is the checking account that all income comes into)

  • Now it gets distributed to my other accounts

• 30% to Expenses (this can absolutely be higher, but currently I have no virtual assistance on my team, and I do not pay for leads as I use YouTube to generate them. This absolutely can be higher depending on your strategy.)

• 30% to owner’s salary (this goes towards the money I pay myself every single month.)

• 30% Taxes (I always make this bucket a little bit higher than needed to be safe as I also have to pay payroll tax.)

• 10% Profit (in profit first, this account withholds some of the money you usually pay yourself, so you can withdraw half of the account every quarter.)

Build Wealth Beyond the Deal

Once you start tracking the money in your business, how do you save it? As small business owners, we have the opportunity to make a real impact on our families and the lives of others.

We all know death and taxes are some of the most impossible things to avoid on this earth so why not create a plan to keep as much of your money as you can put it towards good use.

In the coming weeks, I hope to share specific strategies. For now, the most important thing is to begin creating tax plans based on your situation, whether that involves contributing to retirement accounts, investing in real estate deals, or other similar options.

Before you even pay yourself from your business, when you track your money correctly, I promise you, there are so many strategies to save substantial amounts on taxes and get money into your pocket that's legal and in my opinion, proper to do, so that way those you care about can prosper as well.

P.S. I also have a podcast, which goes into more depth! Commission Keeper podcast soon to be out on most major platforms! This is where I get to stray from the script of the weekly newsletter and add more depth!

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Disclaimer:

I’m not a CPA or financial advisor. The information here is for educational purposes only. I am not a licensed tax professional, but I am legally allowed to prepare and assist with taxes. However, this should not be taken as formal tax or financial advice for your specific situation. Please consult your own licensed professional when needed.

Meet The Guide and Contributor

Hey there, my name is Cameron Hodge, a Marine Veteran, Real estate Agent in two States (CA & FL), and Tax preparer who has a desire to help those fellow Men and women I have met in the years I have been licensed to keep more and do with their commission.

I decided that our industry doesn’t need another expert who shows you how to generate leads, but what to do once you start to make good money in this business. I want you to know I have earned 6 figures in this business, having been licensed since 2020, owning my first rental property starting in 2017, and generating over 100 leads from YouTube, and at one point, I had nothing left to show for it because I mismanaged all the winnings I made.

This newsletter is my way to share what I have learned not only in pre-tax strategies and tools, but also in tax strategies that you can start using to build a long-term plan for the future.

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What You’ll Learn Here

Tax Strategy

There are many ways to save on taxes, from simply tracking mileage and expenses to creating the proper entity. Turbo tax also may work for sub 60K earnings in your business, but once you become one of those top agents you simply cannot afford not to start tax planning and using the best startegies for your type of business.

Commission Protection

Here is the real fun, diving into non-biased takes on emerging brokerages, models, honest reviews of money claims, and finding those hidden fees we pay even before Uncle Sam gets a piece.

Tools and Systems

What are the new tools and systems to manage your commission? Pay your virtual assistants and bank to have the most efficient and data-rich system possible.

Business Insights and Case Studies

Top insights into changing tax codes, state laws, and more that affect your business every single year. Being informed is the only way to plan accordingly, something I know most of your tax leaders are not giving you.

How often is it released?

You can expect a new email with the newsletter every Tuesday, ready to be enjoyed! Also dont worry, for those one the go like me with 3 kids I will be doing an audio recap, and if youre real hungry feel free to read both incase I add more audio info that that weeks podcast :).

Ready To Level Up?

Simply subscribe and share the newletter to begin the journey with me and to build a better business not only for you but for future Agents and Brokers to come!

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Disclaimer:

Super Dad Tax LLC provides professional tax preparation and advisory services. While I am a fellow real estate agent and am also authorized to prepare and file federal and state tax returns, as well as provide tax planning guidance, I am not an Enrolled Agent (EA) or Certified Public Accountant (CPA) and therefore cannot represent clients before the IRS in certain matters. I am also not a licensed financial advisor or investment professional. The information shared in this newsletter/podcast is for educational purposes only and should not be considered individualized tax, legal, financial, or investment advice. If you’d like to explore how these ideas may apply to your unique situation, reach out to us and we’ll help you find the best path forward!