Check out my YouTube video on the Tax Law Guy channel for more details on the ultimate Real Estate Agent Tax Strategy!

▶︎▶︎▶︎ Request a free Real Estate Agent Tax Strategy phone session with Tax Attorney Joshua Sells – use activation code 730580 – – – you must enter the activation code to waive the $1850 fee! This is a must attend if you are a real estate agent – Attorney Sells will review your specific real estate agent situation and provide custom recommendations based on your own unique situation. ▶︎▶︎▶︎ https://calendly.com/ohiotaxattorney/real-estate-agent-tax-strategy-session

(1) Form an S Corporation (get help from your Tax Attorney)

As a Cleveland tax attorney, I have worked with a lot of realtors to develop a comprehensive real estate agent tax strategy. By far the biggest competitive advantage a realtor can get when it comes to tax savings is forming an S Corporation. An S Corporation will eliminate self-employment tax (which is around 15% of your self-employment “profit”) if you the real estate agent is on the payroll of the S Corporation.

We’re not going to discuss the logistics of how to set up an S Corporation, or how to establish payroll, but a properly formed S Corporation with a running payroll system will generally cut a real estate agent’s 1040 tax bill in half.

(2) Adopt an Accountable Reimbursement Plan – A Must Have Real Estate Agent Tax Strategy

Once the S Corporation is formed, this is where you can take it to new heights. By forming an accountable reimbursement plan, a real estate agent can be reimbursed by the S Corporation for business mileage driven on the personal vehicle. This is different from self-employment. With self-employment, those business miles were simply deducted. Since the S Corporation is a separate entity for federal income tax purposes, the real estate agent must be reimbursed.

This reimbursement is tax-free to the real estate agent, but the S Corporation get’s to deduct the reimbursement. When combined with other reimbursements (such as a home office, cell phone, etc.), this strategy can effectively cut the tax bill down by another 15-20%. It is important to work with a licensed attorney to draft an acceptable accountable reimbursement plan as it is a legal document. As a local and licensed Cleveland tax attorney, we have seen many real estate agents use accountable plans that don’t meet the strict requirements of the IRS.

(3) Pay Healthcare Premiums out of the S Corporation Checking Account

Most real estate agents have some form of healthcare. It is a best practice to pay those premiums for the S Corporation owner out of the S Corporation checking account. The S Corporation will get a deduction, while the owner-employee real estate agent will show this amount on the W-2 as additional income (not subject to FICA). The great part is that the S Corporation owner-employee will then get an above-the-line deduction on the 1040 for the health insurance premiums.

So, no taxes will be paid on the health care premiums and the owner-employee real estate agent has been able to increate his/her income for purposes of “reasonable salary” and also for purposes of 401(k) retirement contributions.

(4) Fund an HSA out of the S Corporation Checking Account

As with the healthcare premiums, the same strategy can be taken for HSA contributions if the real estate agent has a high-deductible plan and otherwise qualifies. As mentioned, this is a great way to avoid paying taxes and maximize W-2 income for purposes of the “reasonable salary” requirement of the S Corporation and also for determining maximum 401(k) contributions (or SEP IRA contributions).

(5) Open and Fund a 401(k) through the S Corporation

With an S Corporation in place, a real estate agent can use a company such as Guideline to open a 401(k). The S Corporation can contribute to the 401(k) and this amount would be fully deductible for the S Corporation and tax-free to the real estate agent owner-employee. Additionally, the real estate agent owner-employee can make payroll deferrals into the 401(k) as well.

This is a great strategy to reduce income tax and funnel savings into a retirement account.

(6) Offset Income with Passive Losses

There are a lot of moving parts with this strategy, but if implemented correctly, passive losses can significantly offset certain income. A real estate agent may be in a unique situation to take advantage of other passive loss rules. Any good real estate agent tax planning strategy will definitely include an analysis of passive loss deductions.

(7) Make a Tradition IRA Contribution

If a real estate agent is in a higher tax bracket (we hope not after all of the above!), then making a traditional IRA contribution will also reduce the tax bill. If a real estate agent is in a lower tax bracket, a ROTH contribution may make more sense.

If these strategies sound like tax planning strategies that may work for you, head over to our Tax Law Guy YouTube channel and watch your Cleveland Tax Attorney explain these tips in more detail. If you are a real estate agent with a back tax issue, there are ways of dealing with that, including a settlement.

▶︎▶︎▶︎ Request a free Real Estate Agent Tax Strategy phone session with Tax Attorney Joshua Sells – use activation code 730580 – – – you must enter the activation code to waive the $1850 fee! This is a must attend if you are a real estate agent – Attorney Sells will review your specific real estate agent situation and provide custom recommendations based on your own unique situation. ▶︎▶︎▶︎ https://calendly.com/ohiotaxattorney/real-estate-agent-tax-strategy-session

Check out my YouTube video on the Tax Law Guy channel for more details on the ultimate Real Estate Agent Tax Strategy!