S corporation compensation, retirement plans for commission earners, the brokerage entity, and turning commissions into owned property.
Brokers and agents earn some of the least planned income in the country. Commissions arrive as 1099 income, self-employment tax applies to all of it, expenses are tracked in April, and the retirement plan is whatever was left after the last closing. Brokerage owners add payroll, agent splits and a book of business nobody has valued.
The plan is mostly structural and repeats every year. Commission income through an S corporation with a reasonable salary decides self-employment tax. A solo 401(k) or, for an established broker, a defined benefit plan turns strong years into deferred wealth. An accountable plan captures the car, the phone and the home office properly. And the same commissions, redirected into rental property with a cost segregation study, start producing depreciation and income that outlasts the market.
We review three years of returns and the commission statements, model the entity and plan alternatives, and write the plan with a quarterly calendar so nothing waits for April.
What we typically see: Commissions on a Schedule C with self-employment tax on every dollar. Mileage reconstructed at tax time. No retirement plan in a $400K year. A brokerage with no structure around the book of business.
Each one is modeled against your numbers and written into the blueprint with the documentation it needs.
Filed correctly every year, no idea I was overpaying. A handful of strategies returned about seventeen thousand a year without changing the business.
Usually once commissions clear the point where the payroll cost is smaller than the self-employment tax saved. The model shows the crossover for your numbers, and state rules on who can receive commissions matter.
Brokerage counts as a real property trade, so many full-time agents meet the hours test. Material participation in the rentals and the grouping election are what most people miss.
A defined benefit plan contribution, equipment and property purchases timed into the year, and entity decisions made before December, not after.
Agent classification, splits and the brokerage entity are reviewed together, so the structure holds up for tax and for the eventual sale of the book.
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