What Taxes Does a New Brokerage Pay? A Complete Guide
New real estate brokerages face federal, state, and local taxes. Learn the key taxes, rates, and deadlines, plus practical steps to stay compliant.
Starting a real estate brokerage is exciting, but the tax landscape can be overwhelming. You’ll owe federal income tax, self-employment tax, and possibly state and local taxes, plus payroll taxes if you have employees. This guide breaks down the specific taxes a new brokerage pays, with realistic 2026 figures and actionable steps you can take this week.
Federal Income Tax
Your brokerage’s federal income tax depends on your business structure. Most new brokerages start as an LLC or S-corp, but sole proprietorships and C-corps are also options.
- Sole Proprietorship/LLC (single-member): Profits pass through to your personal return. You pay tax at your individual rate, which ranges from 10% to 37% for 2026. The average effective rate for small business owners is around 20% to 25%.
- Partnership/LLC (multi-member): Similar pass-through, but you file Form 1065 and issue K-1s to partners.
- S-Corp: Profits pass through, but you must pay yourself a “reasonable salary” (subject to payroll taxes) and the rest as distributions. This can save on self-employment tax, but adds administrative costs.
- C-Corp: The corporation pays a flat 21% federal tax, and shareholders pay tax on dividends. This is rarely beneficial for a new brokerage.
Estimated tax payments: You must pay quarterly estimated taxes if you expect to owe more than $1,000. For 2026, the due dates are April 15, June 15, September 15, and January 15, 2027. Use Form 1040-ES.
Self-Employment Tax
If you’re a sole proprietor, partner, or LLC member (not an S-corp shareholder-employee), you pay self-employment tax of 15.3% (12.4% for Social Security and 2.9% for Medicare) on your net earnings. For 2026, the Social Security wage base is projected to be $176,100. Above that, only the 2.9% Medicare tax applies, plus an additional 0.9% for high earners (over $200,000 single, $250,000 married filing jointly).
This tax is in addition to income tax, and it’s calculated on Schedule SE.
State and Local Taxes
Most states impose a state income tax on business profits. Rates vary widely:
| State | State Income Tax Rate (2026) |
|---|---|
| California | 8.84% (LLC) or up to 13.3% (personal) |
| Texas | No state income tax, but franchise tax of 0.375% to 0.75% |
| Florida | 5.5% corporate, but no personal income tax |
| New York | 6.5% to 8.82% corporate, plus personal rates up to 10.9% |
| Nevada | No income tax, but commerce tax applies |
Check your state’s revenue department for specifics. Some cities also levy local income taxes (e.g., New York City, Philadelphia).
Payroll Taxes
If you have employees (including yourself as an S-corp owner), you must withhold and pay:
- Federal income tax withholding (based on W-4s)
- Social Security and Medicare (FICA): 7.65% from employee, 7.65% employer match
- Federal unemployment tax (FUTA): 6% on the first $7,000 of each employee’s wages, but you get a credit of up to 5.4% if you pay state unemployment on time, netting 0.6%
- State unemployment tax (SUTA): Rates vary, typically 1% to 6% of the first $7,000 to $40,000 of wages
You’ll need an EIN, register with your state’s unemployment agency, and file Form 941 quarterly.
Sales and Use Tax
Real estate commissions are generally not subject to sales tax. However, if you sell ancillary products (e.g., home warranties, marketing materials, or training courses), you may need to collect sales tax. Rates range from 0% to 10% depending on state and locality. Register with your state’s department of revenue if applicable.
Property Tax and Other Local Taxes
If you own office space, you’ll pay property tax, which varies by county and city. If you rent, you may pay personal property tax on furniture and equipment in some states. Check with your local assessor.
Tax Deadlines and Forms
| Tax | Form | Due Date |
|---|---|---|
| Estimated tax (individual) | 1040-ES | Quarterly: Apr 15, Jun 15, Sep 15, Jan 15 |
| Partnership return | 1065 | March 15 (or extended to Sep 15) |
| S-corp return | 1120-S | March 15 (or extended to Sep 15) |
| C-corp return | 1120 | April 15 (or extended to Oct 15) |
| Payroll tax (quarterly) | 941 | Apr 30, Jul 31, Oct 31, Jan 31 |
| Federal unemployment | 940 | Jan 31 |
Practical Steps You Can Take This Week
- Choose your entity wisely. If you’re a solo broker, an S-corp might save you thousands in self-employment tax, but only if you can justify a reasonable salary. Talk to a CPA.
- Open a separate business bank account. This makes tracking income and expenses much easier.
- Set up accounting software. Use QuickBooks or Xero to track every transaction. Categorize expenses like marketing, E&O insurance, and office rent.
- Calculate your estimated tax. Use last year’s income (if any) or project your first year’s profit. Pay at least 100% of last year’s liability (or 110% if AGI > $150,000) to avoid penalties.
- Register for state and local taxes. Visit your state’s revenue website and register for income tax, sales tax (if needed), and unemployment insurance.
- Hire a tax professional. A CPA who works with real estate brokerages can save you more than their fee in deductions and compliance.
FAQ
Q: Do I have to pay self-employment tax if I form an LLC? A: Yes, unless you elect S-corp status. Single-member LLCs are treated as sole proprietorships for tax purposes, so you pay self-employment tax on all net earnings.
Q: Can I deduct my real estate license fees and continuing education? A: Yes, these are ordinary and necessary business expenses. License fees, renewal costs, and CE courses are deductible on Schedule C.
Q: What if I don’t make a profit in my first year? A: You may still owe self-employment tax if you have net earnings, but if you have a loss, you can offset other income. You may also be able to carry the loss forward. Consult a tax pro.
Q: How often do I need to file sales tax? A: It depends on your state and volume. Most states require monthly or quarterly filings. Check your state’s rules.
The Bottom Line
A new brokerage faces federal income tax, self-employment tax, state and local taxes, and payroll taxes if you have staff. The exact amounts vary, but expect to set aside 25% to 35% of your net profit for taxes. Start with a solid entity structure, track every expense, and make quarterly estimated payments. Hire a CPA who understands real estate to keep you compliant and minimize your burden. Take the steps above this week to avoid surprises next April.