CPA for Real Estate Agents and Investors in Los Angeles

Situations We Handle

An agent paid on commission. A licensed real estate agent is a statutory nonemployee, treated as self-employed for federal income and employment taxes when substantially all pay is tied to sales and a written contract says the agent is not an employee for federal tax purposes. California law lets a broker and a salesperson licensed under that broker set their relationship as independent contractor or as employer and employee. The brokerage reports the commissions on Form 1099-NEC, which for payments made in 2026 is required once a payee receives $2,000 or more in the year. We prepare Schedule C with the deductions the records support, including mileage at the standard rate of 72.5 cents a mile for January through June 2026 and 76 cents for July through December, and Schedule SE for the 15.3 percent self-employment tax, 12.4 percent for Social Security on earnings up to the $184,500 wage base for 2026 and 2.9 percent for Medicare, charged on 92.35 percent of net earnings once they reach $400. See Individual Tax Preparation.

Estimated payments on uneven commissions. An agent who expects to owe $1,000 or more of federal tax makes estimated payments, due April 15, June 15, September 15 and January 15; a penalty is avoided when the payments cover 90 percent of this year's tax or 100 percent of last year's, 110 percent when last year's adjusted gross income was over $150,000. California requires estimates once $500 or more is expected ($250 if married filing separately), paid 30, 40, 0 and 30 percent on the same four dates. Commissions arrive at closings, not every month, so we set each payment from the closings to date and the pipeline rather than from last year's figure alone. See Tax Planning.

An agent operating through an S corporation. The corporation pays the agent reasonable compensation through payroll before non-wage distributions, judged on factors such as duties, time devoted to the business and what comparable businesses pay, and pays California 1.5 percent of its net income with an $800 minimum franchise tax, waived in its first taxable year. Form 2553 is due no more than 2 months and 15 days after the beginning of the tax year the election is to take effect. We compare the tax under each structure with the agent's commission figures first, then run the salary through payroll, prepare Form 1120-S and Form 100S with the Schedule K-1, and prepare the agent's own return from the same figures. See CPA for S Corporation Owners.

An LLC for the business or for a property. An LLC pays California's $800 annual tax and, from $250,000 of total California income, an LLC fee of $900 at $250,000–$499,999, $2,500 at $500,000–$999,999, $6,000 at $1,000,000–$4,999,999 and $11,790 at $5,000,000 or more, estimated and paid by the 15th day of the 6th month. A property held in an LLC with two or more members files Form 1065 and Form 568 with a Schedule K-1 for each member; a single-member LLC's property stays on the owner's Schedule E, while the LLC still files Form 568 and pays the $800 annual tax in California. We set up the LLC, calculate the annual tax and the fee, and prepare the entity return. See Business Formation and Business Tax Preparation.

Rental and investment property. Each property is reported in its own column of Schedule E, and a residential rental building is depreciated over 27.5 years. Rental losses are passive: an owner who actively participates can deduct up to $25,000 of loss against other income, reduced by half of modified adjusted gross income over $100,000 and gone at $150,000, unless the owner is a real estate professional, which takes more than 750 hours and more than half of all personal services in real property trades or businesses with material participation. California does not follow the real estate professional exception, so the California loss is figured separately on form FTB 3801. The 100 percent special depreciation allowance applies to qualified property acquired and placed in service after January 19, 2025, and California does not conform to it, so we keep a federal and a California depreciation schedule for every property. See Rental Property Owners.

Selling or exchanging a property. The part of the gain that comes from depreciation on the building, unrecaptured section 1250 gain, is taxed federally at a maximum of 25 percent, California taxes the whole gain as ordinary income, and escrow generally withholds 3 1/3 percent of the price for California unless the seller elects the alternative calculation on Form 593. In a 1031 exchange the replacement property must be identified within 45 days and received within 180 days, like-kind exchanges are limited to real property, and the exchange is reported on Form 8824. When California property is exchanged for property in another state, FTB 3840 is filed every year until the deferred gain is recognized. We estimate the tax before a sale closes and report the exchange on both forms.