Start with a dedicated business bank account and credit card. Every commission check gets deposited into the business account, and every business expense gets paid from it. Mixing personal and business transactions is the fastest way to lose track of what you actually earned and spent. This one step eliminates most of the confusion agents run into at tax time.

For commission income, record the gross commission on each closing, not just what hits your bank account after the brokerage takes their split. Your 1099 from the brokerage will reflect the gross amount, and that’s what the IRS sees. Then record the brokerage split as a separate expense line. This gives you an accurate picture of your total production and what you’re actually paying to your brokerage over the course of a year. If you only track net deposits, you’ll have a mismatch when your 1099 arrives and you’ll scramble to reconcile it.

Keep a simple spreadsheet or use your accounting software to log each transaction with the closing date, property address, gross commission, brokerage split, and net received. Some agents also track the buyer or seller name and referral source so they can see which lead channels are actually generating income. This doesn’t have to be complicated, but it does need to happen after every closing, not once a quarter.

On the expense side, real estate agents have a long list of legitimate deductions that add up fast. MLS dues, association fees, lockbox fees, continuing education, license renewal, E&O insurance, marketing costs, photography and staging, signage, website hosting, CRM subscriptions, lead generation platforms, client gifts, and business meals all count. Categorize each expense when it happens so you’re not guessing months later what that $312 charge was for.

Vehicle expenses deserve special attention because agents drive constantly. You can either track actual vehicle costs (gas, maintenance, insurance, depreciation) or use the standard mileage rate. The mileage rate is simpler but requires you to log every business trip with the date, destination, purpose, and miles driven. Use a mileage tracking app that runs in the background. Trying to reconstruct a year of driving from memory doesn’t work.

Because commission income is irregular, set aside a percentage of every check for taxes. As a 1099 independent contractor, nobody is withholding federal income tax or self-employment tax for you. A common starting point is 25% to 30%, though the right number depends on your total income and deductions. Pay quarterly estimated taxes to avoid a big bill and penalties in April.

Review your numbers monthly, even if it’s just a quick look. Knowing your average commission, your monthly expenses, and your effective brokerage cost helps you make better decisions about where to spend marketing dollars and whether your current split still makes sense. A Houston fractional CFO can help you build that kind of analysis if you want to get more strategic about your business finances.

The agents who stay on top of their books aren’t doing anything fancy. They’re just consistent. Record income at closing, categorize expenses weekly, track mileage daily, and reconcile the bank account monthly. That rhythm keeps everything clean and means tax season is a non-event instead of a crisis.