As a REALTOR®, the Internal Revenue Service (IRS) considers you self-employed. This means you're required to pay quarterly taxes. Quarterly taxes are an estimated tax payment for the year's earnings, divided by four, and are used to pay Social Security tax, Medicare tax and income taxes.
It doesn't matter if real estate is just a side gig for you; if you make more than about $15,000 per year, you will probably need to pay quarterly taxes. For most successful REALTORS®, quarterly taxes are an unavoidable responsibility, so it serves you to fully understand and plan for them.
Quarterly tax payments are actually an estimate of your income for the current year, based on your earned income from the previous year, so it is critical to keep all of your business expenses as organized as possible.
Skip the manual approach of using shoeboxes or spreadsheets for organization; instead, use software like QuickBooks Self-Employed to keep track of your earnings, expenses and deductions. QuickBooks Self-Employed comes fully equipped with features like a receipt uploader, tax reports, mileage tracker and Money Insights, all of which can help you see beyond the daily details so you can make more strategic tax decisions.
Know the Deadlines
There's no wiggle room when it comes to the IRS. Being on time with your payments is critical and late payments are subject to penalties and interest fees. As the name suggests, quarterly taxes are due four times a year; however, the dates are not in even increments. The due dates are:
- April 15: For income earned between January 1 and March 31
- June 15: For income earned between April 1 and May 31
- September 15: For income earned between June 1 and August 31
- January 15: For income earned between September 1 and December 31
If the 15th day of the month when quarterly taxes are due falls on a weekend or holiday, the due date is the following business day.
Calculating What You Owe
Review your tax return from last year to find the total amount of taxes you owed for your real estate income. Multiply that total by .9 and then divide that amount by four to get your quarterly payment amount. Submit that amount on IRS Form 1040-ES with a check and you will be all set until the next due date. If you're using QuickBooks Self-Employed, the software will calculate this estimated payment automatically.
If this amount seems too high or too low or if you have a more complicated income stream, consult a tax professional for more specific guidance on how much you should pay each quarter.