Real estate & rental
Real Estate Agent Income Calculator
Works agent income, where the gross figure has several deductions before it is yours.
Result
Not tax advice. Agents are usually self-employed, so both halves of employment tax fall on them, quarterly estimated payments are required, and there is no withholding. Health insurance, retirement and time between closings are all paid from this figure.
Get a Free Business AuditHow the calculation works
Transactions times average compensation gives gross income, less the brokerage split, less franchise and transaction fees, less business expenses, giving net income before tax. As an independent contractor nothing is withheld, so income and self-employment tax still come out of that net.
What moves the number
- Transactions completed and average compensation.
- Brokerage split and any cap arrangement.
- Business expenses, which are substantial in this work.
- Self-employment and income tax, not withheld.
Where this one goes wrong
The gap between gross compensation and spendable income is wide, and agents who budget from the gross figure are the ones who find the tax bill impossible. Work out the net after split, fees, expenses and tax, and treat that as the income. Transaction count is also lumpy and seasonal rather than steady, which means an annual figure divided by twelve describes no actual month and a reserve is required to smooth it.
Before you quote
- Budget from net after split, fees, expenses and tax.
- Set aside tax from each transaction as it closes.
- Hold a reserve, since transactions are lumpy.
Questions
About this calculator
Why is agent income so much less than the gross commission?
The brokerage split, franchise and transaction fees, business expenses and then income and self-employment tax all come out. Agents who budget from the gross figure are the ones for whom the tax bill becomes impossible.
Is tax withheld from an agent's commission?
Generally not, since most agents are independent contractors. That means setting aside a share of every closing for quarterly estimated payments, rather than discovering the whole year's obligation at filing with nothing reserved.
How should seasonal income be managed?
With a reserve, because transaction counts are lumpy and an annual figure divided by twelve describes no actual month. Agents who hold several months of expenses in reserve survive quiet periods that otherwise force bad decisions.
The formula
take home = (gross commission x split - fees - expenses) x (1 - tax set aside)
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How to use this calculator
- Transactions per year. Enter your own figure; the page starts at 14.
- Average sale price ($). Enter your own figure; the page starts at $420,000.
- Your side of the commission (%). Enter your own figure; the page starts at 2.75%.
- Your share after the split (%). Enter your own figure; the page starts at 70%.
- Monthly brokerage fees ($). Enter your own figure; the page starts at $150.
- Annual business expenses ($). Enter your own figure; the page starts at $14,000.
The result updates as you type, so you can try a figure, see what it does to take home after tax, and change it back. Nothing you enter is sent anywhere or saved.
A worked example
These are the figures the calculator opens with. Every number in the results column below is produced by the same calculation the page runs, so you can follow it through before putting your own figures in.
What goes in
| Input | Value |
|---|---|
| Transactions per year | 14 |
| Average sale price | $420,000 |
| Your side of the commission | 2.75% |
| Your share after the split | 70% |
| Monthly brokerage fees | $150 |
| Annual business expenses | $14,000 |
| Tax set aside | 28% |
What comes out
| Result | Value |
|---|---|
| Take home after tax main result | $70,121 |
| Gross commission | $161,700 |
| After the brokerage split | $111,390 |
| Net before tax | $97,390 |
| Take home per transaction | $5,009 |
Gross commission of $161,700 becomes $70,121 after the split, fees, expenses and tax, which is $5,009 per transaction. The gap between the two numbers is what surprises most new agents.
How sensitive the answer is
Holding everything else steady and changing only average sale price, this is what happens to take home after tax. It is worth knowing which of your inputs the answer actually hinges on, and which barely move it.
| Average sale price ($) | Take home after tax |
|---|---|
| $210,000 | $29,372 |
| $315,000 | $49,747 |
| $420,000 example above | $70,121 |
| $630,000 | $110,869 |
| $840,000 | $151,618 |
Every other input is held at the example value while this one changes, which is not how a real job behaves. Treat it as a guide to which number matters most, not as five separate quotes.
What each figure means
- Transactions per year
- A number, between 0 and 500, starting at 14.
- Average sale price ($)
- A money amount, starting at $420,000.
- Your side of the commission (%)
- A percentage, between 0 and 6, starting at 2.75%.
- Your share after the split (%)
- A percentage, between 0 and 100, starting at 70%.
- Monthly brokerage fees ($)
- A money amount, starting at $150.
- Annual business expenses ($)
- A money amount, starting at $14,000.
- Tax set aside (%)
- A percentage, between 0 and 50, starting at 28%.
What the results tell you
| Result | What it is |
|---|---|
| Take home after tax | The headline result. A money figure. |
| Gross commission | A money figure. |
| After the brokerage split | A money figure. |
| Net before tax | A money figure. |
| Take home per transaction | A money figure. |
What is not in this number
Property figures here exclude the costs that decide whether a deal works: vacancy, maintenance, management, capital expenditure and the transaction costs at both ends. A return that looks strong before those frequently does not survive them.
Keep going
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