**Sources (with links) used for this article are compiled at the bottom. These sources would also be good for further reading/research into the topic.
Disclaimer: This article is for informational purposes only and is not intended as tax, legal, or financial advice. Every situation is different, and tax laws can change. Before making any financial decisions or filing your taxes, speak with a licensed tax professional or accountant who understands your specific business and state rules. Always do your own research to make sure the strategies mentioned here are right for you.
Do you love the freedom of being your own boss, but hate the stress of tax time? You're not alone. As a self-employed real estate agent or MLO, you enjoy flexible schedules and control over your work. However, the flip side of that independence is handling your own taxes, and that can get complicated. Unlike a nine-to-five employee with taxes automatically taken out of paychecks, you have to plan and pay taxes yourself. The good news is that a little proactive planning in the final quarter (Q4) of the year can spare you a lot of stress (and money) when April rolls around. Let's break down some friendly advice to help you finish the year strong and enter next tax season with confidence.
Embracing the Self-Employed Life (and Taxes)
Being self-employed means you call the shots, but it also means tax responsibilities squarely fall on your shoulders. Real estate agents and MLOs are typically treated as independent contractors for tax purposes. This means no automatic paycheck withholdings. You have to send the IRS its share yourself.
On top of your regular income tax, you pay self-employment tax, which is about 15.3% of your net earnings (covering Social Security and Medicare). This can come as a shock if you're new to the game, because it's essentially the combined “employee and employer” share that traditional employees and their companies split.
Estimated Taxes
To avoid a nasty surprise in April, you’re expected to pay taxes in quarterly installments throughout the year. The IRS’ due dates are usually:
- April 15
- June 15
- September 15
- The following January 15 (to cover the last quarter of the year)
Missing these estimated tax payments can lead to penalties, so it’s important to stay on top of them. A good practice is to set aside a portion of each commission check (many experts recommend around 30% of your income) for federal taxes (and state taxes, if you have them).
It may feel like a lot, but this cushion helps make sure you have enough to cover both income taxes and that self-employment tax. With steady savings and timely estimated payments, you can avoid scrambling in April or facing an overwhelming tax bill.
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Smart Year-End Moves to Trim Your Tax Bill
As the year winds down, now is the time to make some strategic moves that can pay off come tax time. Think of Q4 as your chance for a financial tune-up before the books close on 2025. Here are a few smart steps to consider before December 31 to potentially lower your tax hit.
Prepay Business Expenses
Do you have bills due in early 2026, like insurance premiums, office rent, or association dues? Paying them now can allow you to deduct them in 2025.
For example, if your professional association membership renewal is due in January, paying it by December 31 lets you take that write-off this year.
Invest in Your Business
If you’ve been eyeing a new laptop, phone, or even a vehicle for work, year-end could be the time to act. The tax code allows generous deductions for business assets (thanks to rules like Section 179 expensing and bonus depreciation).
In plain English... you might be able to deduct the full (or a large) cost of equipment and vehicles in the year you buy them, rather than spreading it over several years. That means buying needed gear now could give you a big deduction on your 2025 return. Of course, don’t buy something just for a tax break. It should be something that genuinely helps your business.
Boost Your Retirement Savings
One of the best win-win tax moves is contributing to a retirement plan. As a self-employed professional, you have options like a SEP IRA or a Solo 401(k) that allow large contributions. Money you put into these accounts is generally tax-deductible, reducing your taxable income.
For instance, depending on your income, you could potentially contribute (and deduct) tens of thousands of dollars into a SEP IRA. It’s a powerful way to save on taxes and invest in your future. Keep in mind some retirement contributions can be made up until the tax filing deadline, but setting things up now is wise.
Double-Check Your Tax Payments
Take a moment to estimate your total income and taxes for the year. Compare that to what you’ve paid in estimates so far.
If you’re short, consider making an extra payment before year-end or by the Q4 deadline (Jan 15). This will not only reduce your April bill but also help avoid underpayment penalties.
Get Organized (and Get Help if Needed)
Use this time to organize your receipts and update your books for the year. It’s much easier to remember what that $200 charge in March was for now, rather than next April.
- If bookkeeping isn’t your strength, consider hiring a professional or using accounting software.
- Also, think about a year-end chat with a tax advisor, especially if your income changed a lot this year. They might suggest advanced strategies tailored to you.
For example, if your profits have grown substantially, you could discuss whether electing S-Corporation status for your business in the new year might save on self-employment taxes. Such an election typically needs to be filed by March 15 to apply for the year. A professional can help you identify moves like this and make sure you’re not leaving any money on the table.
Write-Off Wisdom... Do's and Don'ts
One perk of being self-employed is the ability to deduct many of your business-related costs. Every legitimate write-off reduces your taxable income, which can save you a lot of money. But using deductions wisely is a balancing act. You want to claim every expense you’re entitled to without crossing any lines. Here are some do’s and don’ts to keep your write-offs on the straight and narrow.
Do: Keep Good Records and Save Your Receipts
If you buy something for your business (whether it's a new lockbox for a listing or just coffee with a client), record it. Come tax time, you’ll thank yourself.
Solid documentation helps you remember to take the deduction and protects you in case of an audit.
Do: Claim the Everyday Expenses that are Ordinary and Necessary for Your Line of Work
Common examples for agents and MLOs include, but not limited to:
- Vehicle mileage or gas
- Home office expenses
- Marketing and advertising costs
- MLS and licensing fees
- Continuing education
- Office supplies
- Professional services (like your accounting software or hiring a bookkeeper)
All those little costs throughout the year can add up to substantial deductions. In fact, when you total things up, it's not uncommon to find you’ve racked up many thousands of dollars in business expenses, which translates to a much lower tax bill.
Don't: Mix Business and Personal Finances
Use a separate bank account and credit card for business expenses if possible. This makes tracking easier and creates a clear paper trail.
Paying your grocery bill from your business account, for instance, will complicate your bookkeeping and could raise questions. Keep the lines clean.
Don't: Try to Write Off Personal Luxuries as Business Expenses
The IRS has pretty much seen it all. Claiming your family vacation to Disney as a “business conference” is likely to backfire. Be honest with what truly counts as a business expense.
When in doubt, ask yourself: Would I still buy this if I weren’t in this profession? If the answer is no (e.g., you wouldn’t normally write off your personal SUV or that big-screen TV as a business need), then it’s probably not fully deductible.
Do: Be Aware of Special Deduction Limits
Not everything is 100% deductible.
- For example, you can generally deduct only 50% of business-related meal expenses (so that lunch with a client, save the receipt, but remember only half its cost is going on your taxes).
- And client gifts are capped at $25 per recipient per year. No matter how much you love your clients, the IRS isn’t going to let you write off lavish presents.
Knowing these limits ahead of time helps you plan accordingly.
Don't: Spend Money Just to Get a Tax Deduction
It’s easy to get excited about write-offs, but remember... a deduction only gives you back a fraction of what you spend. If you're in the 24% tax bracket, a $100 expense might save you about $24 in tax. You’re still out the other $76.
So, if you don’t actually need that shiny new gadget or first-class “business trip,” think twice. Make business purchases because they benefit your business, not just for a potential tax break.
Do: Take Advantage of Non-Cash Deductions like Depreciation (and the Home Office Deduction, if Applicable)
If you buy a work laptop or a car, you might finance it over time, but you could still deduct the expense on your taxes either all at once or through depreciation.
Similarly, if you use part of your home exclusively for work, you can deduct that portion of your rent or mortgage interest and utilities.
These are expenses you’re paying anyway, so the deductions are basically a freebie. They reduce your taxable income without costing you extra cash flow, so it’s a win-win.
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🧛 Save 30% Before This Deal Disappears!Offer valid through October 31. Use promo code BOO at checkout.
Translating Your Tax Returns into Lender Speak
Taxes aren’t just about the IRS. If you’ve ever tried to get a mortgage or car loan as a self-employed person, you know your tax returns tell a story to lenders, too. Mortgage professionals are likely familiar with how underwriters scrutinize income.
They don’t look at your gross commissions or sales revenue. Instead, they zero in on your net income (the profit after all your expenses) on your tax return. The more expenses you write off, the lower your net income appears. That's great for cutting taxes, but not so great when you need to prove your earning power to a bank.
Depreciation
The key is to find a balance that meets both needs. Start by understanding which expenses won’t hurt you in a lending scenario. For example, depreciation is a non-cash expense that lowers your taxable income, but lenders know it doesn’t actually come out of your bank account each month. In many cases, they will add back your depreciation deductions to your income when assessing your loan application.
In plain terms, you get to deduct something like your car’s wear-and-tear for taxes, but a lender can treat that as money you still have available to pay a loan.
One-Time, Large Expense
Likewise, if you had a one-time, large expense (maybe you invested in an expensive training program or had a big legal expense for your business), it reduced your taxable income for the IRS, but a lender might accept that it’s not an ongoing expense. If you can show it was a one-off cost that won’t repeat, that expense could be added back to your income in the eyes of a lender.
Even your home office deduction might get added back, since it’s effectively accounting paperwork saying part of your rent or mortgage went to business use. It doesn’t actually increase your overall housing costs.
Ongoing Business Expenses
On the other hand, genuine ongoing business expenses (the ones that truly take cash out of your pocket) will reduce the income a lender sees. You can’t write off every lunch, gadget, and getaway and then expect a lender to ignore those costs.
Lenders will typically start with the net income on your tax return (after you've deducted everything) and then do their own tweaks (adding back things like depreciation, and maybe certain one-time costs).
The end result is what they view as your true cash flow. This is why some self-employed folks who aggressively maximize deductions find it tricky to qualify for a loan. They’ve successfully minimized their taxable income, but in doing so, they’ve also minimized the income that a bank will count.
Think Ahead
So, think ahead. If you’re planning to apply for a mortgage or big loan in the next year or two, consider dialing back on the write-offs slightly. You don't have to take every deduction available.
For instance, you might choose not to claim a home office or skip writing off a portion of your auto use for a year, purely to show higher income on paper.
Yes, you’ll pay a bit more in taxes, but it could make the difference in getting approved for the financing you want. Essentially, you’re investing a little more in taxes now to present a stronger financial picture to lenders later.
Don't Give Them All Up
Being strategic doesn’t mean giving up all your deductions. It just means being mindful of their future impact. The beauty of being both in real estate and knowledgeable about mortgages is that you can use that insight for yourself.
Balancing tax savings with your long-term goals (like buying a new home or investment property) means you can have the best of both worlds... lower taxes and attractive, “lender-friendly” income figures. That’s the real trick to being self-employed without the stress in both arenas.
TLDR...
Being a self-employed agent or MLO means you wear a lot of hats, and the tax hat is a big one. But it doesn’t have to be daunting. Taking some time in Q4 to get organized, make smart financial moves, and consider the broader picture of your finances means you can set yourself up for a much smoother tax season. Remember, the goal is to work smarter, not harder. Pay what you owe (and not more than you owe), keep as much of your hard-earned money as you can, and avoid last-minute scrambles in April.
A bit of planning now pays off in peace of mind later. You’ll thank yourself when you’re not frantically sorting receipts at 11 PM on April 14, or when you comfortably qualify for that car loan or home upgrade because you managed your income reporting wisely. So, finish this year strong. Your future self (the one filing taxes next spring) will be all smiles, knowing you took the steps to be self-employed without the stress.
Sources
- AceableAgent – The Definitive Guide to Paying Taxes as a Real Estate Agent
- Mercer Advisors – 15 Legitimate Tax Write-Offs for Real Estate Agents To Track
- Asnani CPA – Q4 Tax Strategy: How Smart Business Owners Maximize Deductions Before Year-End
- TurboTax (Intuit) – Tax Tips for Real Estate Agents and Brokers
- JVM Lending – Six Home Loan Tips For The Self-Employed
- ARF Financial – 2024 Tax Write-Offs for Self-Employed Loan Brokers