Real estate agents have the flexibility to choose a business structure that aligns with their professional and financial goals. Research shows that the top two structures most commonly used by real estate agents are LLCs and S-Corps, as both offer better tax benefits when compared to a sole proprietorship or a C-Corp. When you evaluate these two structures from a taxation perspective, S-corp is even better as it offers more tax benefits and legal protection, and increases your reputation among clients.
Let’s take a more detailed look at the top five tax benefits of an S-Corp for real estate agents.
1. Reduce Self-Employment Taxes
Self-employment taxes can quickly add up, so it’s important to stay on top of them.
LLCs pay ~15.3% SE tax on all net income
A real estate agent who is registered as an LLC or a sole proprietor must pay a self-employment tax at the rate of 15.3%, where 12.4% goes to Social Security and the remaining 2.9% to Medicare.
S-Corps allow splitting income: Salary vs. Distribution
When you switch to S-corp, you can split your income into two parts – a salary and a distribution to shareholders. The first part is taxed, but the second is not. Note that the entire salary portion of the income is still subject to full payroll taxes (Social Security and Medicare). Hence, S-Corp is only beneficial if the “reasonable salary” is set in such a way that you can save money. At the same time, the salary must meet the rules laid down by the IRS.
Real estate agents earning $75K+ often save $5K–$10K/year
Let us assume you’re a real estate agent following a sole proprietorship structure, and you are earning more than $75,000 a year. At the rate of 15.3%, you will pay a self-employment tax of $11,475. Additionally, you will also have to pay the federal and state income taxes.
Now, when you change your company structure to that of S-Corp, you have the option to split the earnings as a salary and distribution. Moreover, there is no self-employment tax as you are deemed an employee of your company. Due to these reasons, you can save anywhere from $5,000 to $10,000 a year on taxes.
2. Pay Yourself a “Reasonable Salary” + Take Tax-Free Distributions
When your business is an S-corp, you are an employee as well as the owner. This means you can decide how you want to split your income. But note that the IRS strictly requires that S-Corp owners are paid a reasonable salary.
Only the salary portion is subject to payroll taxes
Many agents choose to pay themselves a reasonable or nominal salary, and this salary is subject to payroll taxes, including Social Security and Medicare. Ensure your salary is at least equal to the minimum pay rate in your respective state.
Distributions aren’t subject to FICA taxes
After paying a reasonable salary, you can take the rest as a distribution, which is not subject to FICA taxes. This means you get a certain amount as tax-free income.
You control how much goes to salary vs. profit
This setup offers significant flexibility and can help you keep more of your income. You can choose to move more money as a distribution while keeping the salary at minimum wage rates.
However, this requires financial planning and a basic understanding of taxation laws to ensure you are compliant and do not attract IRS audits. Manay CPA can help determine the right balance based on your earnings and the federal and state taxation rates.
3. Claim More Deductible Business Expenses
Another big advantage of switching to an S-corp is that you can claim business expenses on your income. However, these deductions must be closely documented and must be in accordance with the IRS guidelines.
Payroll processing fees, health insurance, and retirement plans
You can deduct organization-related expenses like payroll services, employer-paid health insurance premiums, and 401(k) contributions. These deductions bring down your taxable income.
Business use of home, vehicle mileage, and marketing tools
Additionally, you can also deduct expenses for running your home office, vehicle mileage related to client meetings and showings, listing fees, costs incurred for marketing, cell phone bills directly related to calling and talking to clients, and any other expense connected to running your business. All these expenses can also substantially lower your taxable income.
Manay CPA helps identify industry-specific deductions
There are also many industry-specific deductions you can leverage. Some examples are signage, staging costs, continuing education to improve your real estate business, MLS fees, and more. Reach out to Manay CPA today, as its experts can review your business costs and spending to claim every eligible deduction.
4. Take Advantage of the QBI Deduction
As an S-Corp, you have many tax advantages that you can leverage. Here are the important ones.
Up to 20% deduction on qualified business income
The IRS has allowed individuals to deduct something called a Qualified Business Income (QBI). This is also called the Section 199A deduction. With QBI, you can deduct up to 20% from your taxable income, thereby bringing down the taxable amount. However, you must meet certain criteria to claim this deduction.
Available to S-Corp owners under certain income limits
A notable aspect of QBI is that it is available only if you meet certain income limits. In 2025, the limits are set at $197,300 for those filing single, and $394,600 for those filing a joint return with a spouse.
Optimized with good entity structure and payroll balance
However, to qualify for these deductions, your S-corp must be set up, as per the existing laws, and your salary vs distribution must be reasonable. Manay CPA can help structure your S-corp to meet these QBI requirements, so you can get a 20% deduction on your taxable income.
5. Build Business Credit & Appear More Professional
Switching to S-corp goes beyond just taxation.
S-Corp status adds credibility with lenders and investors
In general, an S-corp reflects professionalism and business continuity when compared to a sole proprietorship or partnership. When you run a company with its own bank account, it reflects professionalism, thereby building more trust and credibility in the eyes of your customers.
Separate business and personal finances more clearly
Also, an S-corp requires separate bank accounts and a streamlined payroll setup, both of which add to financial stability. This means you can attract more customers and can also qualify for business loans and lines of credit.
Easier to scale, hire, or sell your real estate business
Such stability and credibility can help grow your business. It will also be helpful when you plan to merge or sell your business in the future.
Due to the above benefits, it makes sense for real estate agents to switch their existing LLCs or sole proprietorship business structures to an S-Corp status. At the same time, note that S-Corp comes with downsides, so evaluate carefully before making the shift.
Should You Convert Your LLC to an S-Corp?
An S-Corp comes with additional work. For starters, it requires a streamlined payroll process and clear accounting. Since these processes are effort and time-consuming, decide if you must convert your LLC to an S-Corp in the first place. Here are some aspects to consider.
Ideal if net income is $60,000+
Yes, if your income exceeds $60,000. This is often the level at which you will save more by avoiding self-employment taxes, and can benefit from the salary vs distribution structure. Also, at this level, your savings are more than the costs associated with accounting and payroll processing.
Manay CPA can simulate the tax impact for your business
Before you make the switch to an S-Corp, understand the potential benefits and, more importantly, the associated downsides. An experienced company like Manay CPA can simulate the tax impact for your business, so you can decide accordingly if an S-Corp is a better structure for your business.
Filing Form 2553 and setting up payroll is done for you
If you elect to convert to an S-Corp, you must notify the IRS of this change. This is done by filing
Form 2553. Additionally, you must also set up a payroll system to pay yourself as an employee and deduct the corresponding taxes. This can be burdensome, especially if you are not familiar with the process.
This is where Manay CPA, an expert in taxation and payroll processing, can handle the entire process for you. Its experts also help with tax filing and ongoing compliance, so you can focus on building your business.
Manay CPA Can Help You Maximize S-Corp Tax Savings
Understanding the benefits of an S-Corp and choosing to move to it is the first step to increased savings. But to leverage its benefits, you must take additional steps like following proper accounting processes and paying taxes regularly. Companies like Manay CPA can take care of them for you. Its employees are experts in the following areas.
Entity review + EIN + Form 2553 filing
Before electing an S-Corp, talk to the experts at Manay CPA to understand if this is the right move for your business. If you believe so, Manay CPA can handle all the processes required to switch to an S-Corp. As a first step, it files Form 2553 and applies for an EIN.
Bookkeeping, W-2 payroll setup, quarterly tax filings
Manay CPA is known for its streamlined bookkeeping and payroll handling. It can set up a W-2 payroll system for you, and even handle your quarterly filings.
Schedule a free consultation
As your business grows, Manay CPA can handle the increasing transactions while helping you save more money. With Manay CPA, everything stays organized.
To save more money without the hassles of taxation and accounting, schedule a free consultation with Manay CPA today.
