How Real Estate Agents Can Pay Themselves: Salary, Draws, and Distributions Explained

Introduction

One of the most common questions real estate agents ask is:
“How do I actually pay myself?”

As an independent contractor, you don’t get a regular paycheck like employees do. Instead, you’re paid commissions, and those deposits can be unpredictable — $25,000 one month, $0 the next. Without a system, it’s easy to overspend in the good months and stress in the slow ones.

The truth is: how you pay yourself directly impacts your taxes, your cash flow, and your long-term wealth. In this guide, we’ll break down the main ways agents can pay themselves — from owner’s draws to S-Corp salaries — and show you how to create consistency even with irregular income. Managing distributions and payroll is an essential part of the overall strategy for real estate agent taxation. For more information check out the Real Estate Agent Tax Strategy Guide.

1. How Most Real Estate Agents Get Paid

Unlike employees who receive a W-2, most agents receive a 1099-NEC at the end of the year. This means:

• Commissions are paid gross — no taxes withheld.

• You’re responsible for self-employment tax (15.3%) plus federal and state income taxes.

• No one’s sending you a paycheck on the 1st and 15th — you create your own system.

💡 Quick Example:

• An agent earns $120,000 in commissions.

• Brokerage pays out gross commissions (minus split/fees).

• The agent must decide: what’s business reinvestment? what’s personal pay? what’s set aside for taxes?

2. Paying Yourself as a Sole Proprietor or LLC

Most new agents start this way:

• Set up a business checking account.

• Deposit all commission checks.

• Take owner’s draws as needed for personal expenses.

Pros:

• Easy to set up.

• No payroll system required.

• Flexible — you transfer money when you want.

Cons:

• Easy to overspend.

• Every dollar of profit is subject to self-employment tax.

• No built-in structure for saving or budgeting.

💡 Pro Tip: Even as a sole proprietor, treat your business account like a boss. Pay yourself a “set paycheck” from it twice a month instead of dipping in randomly.

3. Paying Yourself Through an S-Corp

When agents grow and net income exceeds ~$60–80k, many elect S-Corp taxation for their LLC. This opens up new ways to pay yourself.

The S-Corp Advantage

With an S-Corp, you split income into:

• Salary: A “reasonable wage” you pay yourself through payroll. Subject to Social Security and Medicare taxes.

• Distributions: Remaining profits you take as owner draws. Not subject to self-employment tax.

Why This Matters

The ability to take part of your income as distributions (instead of salary) can save thousands in taxes each year.

💡 Example:

• Agent earns $120,000 profit.

• Sole Proprietor: pays ~ $18,000 in self-employment taxes.

• S-Corp: sets $60,000 salary + $60,000 distribution.

  • Salary subject to payroll tax.

  • Distribution not subject to SE tax.

  • Saves ~$9,000 annually.

The Trade-Offs

• More admin: must run payroll & separate tax return for the business.

• IRS requires “reasonable compensation” (no $20k salary on $200k income).

• Need bookkeeping + tax support.

4. How to Create a Consistent Paycheck

One of the hardest parts of being an agent isn’t how much you earn — it’s the inconsistency. Some months are flush, others are lean.

Strategies for Consistency

• Set a Salary for Yourself: Even if you’re not an S-Corp, decide on a fixed monthly pay. Example: pay yourself $5,000/month, regardless of commission swings.

• Profit-First Approach: Allocate each commission into buckets:

  • 30% → Taxes

  • 20% → Business expenses

  • 10% → Savings

  • 40% → Owner pay

• Automate Transfers: Every time a commission hits, automatically move funds into the right accounts.

5. Common Mistakes Agents Make

Even high earners make these costly mistakes:

1. Taking every dollar out: Treating business income as personal play money.

2. Forgetting to save for taxes: Spending gross income, then panicking in April.

3. Mixing business and personal accounts: A red flag in an IRS audit.

4. Skipping payroll in an S-Corp: Taking only distributions. The IRS watches this closely.

5. Paying personal bills directly from the business account: Bad for bookkeeping and compliance.

6. Best Practices for Paying Yourself

Here’s how to do it right:

• Open separate accounts (operating, taxes, savings, personal).

• Pay yourself on a regular schedule (biweekly or monthly).

• Work with a CPA to set a reasonable S-Corp salary.

• Use bookkeeping software to track income and categorize expenses.

• Revisit your pay structure annually — as income grows, your system should evolve too.

Conclusion

How you pay yourself as a real estate agent isn’t just about cashflow — it’s about building stability, saving on taxes, and setting up long-term wealth.

• New agents: start with a business account + owner’s draws.

• Growing agents: consider an S-Corp to save on self-employment tax.

• All agents: create a consistent “paycheck” system to avoid feast-or-famine stress.

👉 Want to know the smartest way to pay yourself based on your income level? Schedule a call with The Agent’s Accountant.