Are You Ready For Tax Season? NAR Offers Tips To Survive Tax Time Without Breaking The Bank

When you’re working on commission, planning for tax season can feel overwhelming, and if you’re unprepared, that tax bill can really break the bank. That’s why Victoria Gillespie of  Realtors Federal Credit Union recommends you put away half of each commission check for taxes and a short-term reserve account.

I know, it’s not what anyone wants to hear after closing a transaction, but it’s smart financial planning that Realtors should heed. Gillespie’s advice is part of the National Association of Realtors’ Your Money Matters series of financial advice for real estate professionals.

Gillespie says that planning for slow seasons such as fall and winter is something you shouldn’t overlook. She suggests setting aside 50 percent of every commission, with 30 percent going into an escrow-type account for taxes and 20 percent going into a reserve fund for slow sales seasons, with a goal of saving six months of income as soon as possible.

That means if you earn $5,000 in commissions on a home sale, you should think of it as $2,500 in commission income. “I know that sounds like a dramatic number, but I think it’s important practitioners see it that way,” says Gillespie in the video.

The fact is, you’re going to pay about 30 percent of your income each year in taxes, and it’s a lot easier to pay that by setting aside money each time you get paid so, come tax time, you have the money available. And on the reserve fund, that’s so you have a comfortable cushion of income for those months when you close fewer transactions than you need to pay your bills.

View the full video below:

What do you do to keep yourself prepared for April 15th?