Last updated on April 2nd, 2025 at 01:55 pm

Last Updated on April 2, 2025 by

Real estate agents like any other business owner should learn about accounting, taxes, and other aspects of self-employment.  This article is about the best free easy-to-use accounting for real estate professionals.  You do not need to be a CPA or accountant to manage your finances.  We do recommend that you work with a CPA to look over your books and file your income taxes at the end of the year.  Some agents are great salespersons.  They get lots of listings and sell even more homes working with buyers but that does not make them expert at understanding cash flow. 

This article will take you through several steps necessary to get you organized which is basically the first step.  Before I go further into this, I will mention that many real estate agents own rental properties.  Those rental properties should not be included in the basic organization.  Your properties are individual profit centers and those should stand alone.  Keep any income not strictly earned from the sale of real estate separate from income earned using your real estate license.

Check the list of accounting systems at the bottom of this article. Try out WAVE it’s free. If you make mistakes you can correct them. There are videos to help you. Other popular programs are added as well that can help you with accounting and organization of your business.

We will go through best practices utilized by accountants and finance professionals.  Fortunately, there are several tools included on the Real Estate Agent Commissions website that can be used to forecast future income.  Links to popular tools can be found at the end of this article.  All of our tools are free for Real Estate Agent Commissions members to use.  As mentioned above, we strongly recommend that you work with a CPA to review your work.

YOUR VEHICLE

To start, let’s discuss your vehicle, one of the largest expenses as a real estate agent.  You can deduct the cost of your vehicle by using one of the choices below.

Real estate agents can deduct vehicle expenses incurred for business purposes using two primary methods: the Standard Mileage Rate and the Actual Expense Method.

1. Standard Mileage Rate: This method allows agents to deduct a fixed rate for each business mile driven. For the tax year 2024, the IRS standard mileage rate is 67 cents per mile. To utilize this method, agents must maintain a detailed log of business-related mileage, including dates, destinations, and purposes of each trip. Additionally, parking fees and tolls incurred during business travel can be deducted separately. 

2. Actual Expense Method: Under this approach, agents can deduct the actual costs associated with operating their vehicle for business purposes. Deductible expenses include:

• Fuel
• Maintenance and Repairs
• Insurance
• Depreciation
• Lease Payments (if applicable)
• Registration Fees
• Loan Interest (for financed vehicles)

To determine the deductible amount, agents must calculate the percentage of total vehicle use that is business-related by dividing business miles by total miles driven during the year. This percentage is then applied to the total actual expenses to ascertain the deductible portion. 

Depreciation

Depreciation Considerations: When using the Actual Expense Method, agents can depreciate the cost of their vehicle over its useful life. The IRS provides guidelines on depreciation methods, such as the Modified Accelerated Cost Recovery System (MACRS). Additionally, Section 179 of the Internal Revenue Code allows for the immediate expensing of certain depreciable assets, including vehicles, up to specified limits. However, luxury automobiles are subject to depreciation caps under Section 280F, which may limit the deductible amount. 

Important Considerations:

• Record Keeping: Regardless of the chosen method, maintaining meticulous records is crucial. This includes keeping receipts, mileage logs, and any other documentation supporting the deductions claimed.
• Method Selection: Once a method is chosen for a particular vehicle, switching methods in subsequent years may have limitations. For instance, if the Standard Mileage Rate is used in the first year, switching to the Actual Expense Method in later years is permissible. However, starting with the Actual Expense Method may preclude the use of the Standard Mileage Rate in future years for that vehicle. 
• Personal vs. Business Use: Only the portion of expenses attributable to business use is deductible. Commuting expenses between home and a regular place of work are generally considered personal and are not deductible.

Consider using MileIQ

Most people use the mileage system.  The main reason is that it requires less effort than accounting as stated above to track the other methods.  I use an application called MileIQ which is owned by Microsoft.  This app will automatically track all trips on your vehicle or other vehicles.  I use the technology in your phone to track your movements.  When you complete a trip it tells you how many miles and the value to you if it is a business trip.  All you do is swipe right or left as business or personal after each trip. 

At the end of the year, report the total dollar amount to your CPA.  In the event of an IRS audit, you will have hard evidence of your trips without needing any receipts.  There are other applications that will do the same.  I encourage every real estate agent to buy an app and automate this process.

Basic Accounting

There is no need to spend big dollars to buy a powerful tool to manage your financial reporting.  I use a free accounting system called Wave.  It’s easy to use even for someone who knows nothing about accounting systems.  There are a number of purposes for creating an accounting system such as

An online accounting system offers real estate agents several practical benefits that simplify financial management and improve overall business operations. Here’s how:

1. Efficient Expense Tracking

• Automated Expense Logging: Easily categorize expenses, which can save time and reduce the risk of missing deductions.
• Real-Time Access: Access expenses instantly, making it easier to see where money is going.

2. Income Management and Invoicing

• Automated Invoices: Quickly generate invoices for commissions or other services, reducing administrative effort.
• Income Tracking: Keep tabs on earnings, view monthly summaries, and compare income over time.

3. Tax Preparation Made Simple

• Expense Categorization for Deductions: Track deductible expenses by category, ensuring you capture every potential tax write-off.
• Organized Records: Access all your income, expenses, and receipts in one place, which is a lifesaver when it’s time to file taxes.

4. Improved Financial Insights

• Profit and Loss Reports: Get detailed reports that show how your business is performing at a glance.
• Cash Flow Management: Track cash inflows and outflows, helping you avoid cash shortages or surprises.

5. Access from Anywhere

• Cloud-Based Convenience: Manage your finances on the go, which is ideal when moving between client meetings, showings, or the office.
• Collaboration with Bookkeepers or Accountants: Easily share access with financial professionals, making their work smoother and saving you time.

6. Enhanced Organization and Reduced Paperwork

• Receipt Scanning: Many online systems let you scan and attach receipts, eliminating paper clutter.
• Centralized Records: Store all financial records in one place, which is easy to retrieve when needed.

7. Cost-Effective

• Affordable Subscriptions: Many online accounting tools offer cost-effective solutions tailored for small businesses and freelancers, providing robust features without the price tag of larger accounting software.  Wave is one that is actually free.

By using an online accounting system, real estate agents can focus on their primary responsibilities—building client relationships, closing deals, and providing excellent service—while their finances remain organized and accessible.

Watch for our video on how to use the Wave accounting system.  The principles are the same as with any accounting system.  The Internal Revenue Service recognizes what is called Generally Accepted Accounting Principals (GAAP).   Your accounting system must comply with GAAP which is the following:

Key GAAP Principles Include:

1. Principle of Regularity: Adherence to GAAP rules and regulations.
2. Principle of Consistency: The same methods and principles should be used from period to period.
3. Principle of Sincerity: Reflects accurate and unbiased financial information.
4. Principle of Permanence of Methods: Consistent methods are used in financial reporting.
5. Principle of Non-Compensation: Full transparency, showing both positives and negatives without compensation.
6. Principle of Prudence: Caution in reporting revenue and profits, erring on the side of understatement.
7. Principle of Continuity: Assuming the business will continue to operate.
8. Principle of Periodicity: Financial reporting should be divided into time periods, like quarters or years.
9. Principle of Materiality: Recognizing the impact of errors or omissions that could influence users’ decisions.
10. Principle of Good Faith: Honesty and transparency in all reporting.

All of the above may mean nothing to you but we had to lay it out.  Boiled down, means when you start a process, continue with the same process to provide consistency.  There are two basic methods of accounting.  The accrual and the cost methods.  When you start one of these, you can not change it without IRS approval.

The accrual and cash methods are two primary accounting methods that determine when income and expenses are recorded. Here’s a breakdown of how each method works and its pros and cons:

1. Accrual Method

• How It Works:
  • Income is recorded when it is earned, regardless of when payment is received. For example, if a real estate agent closes a sale in December but doesn’t receive payment until January, the income is still recorded in December.
  • Expenses are recorded when they are incurred, not necessarily when they are paid. So if an expense is incurred in one month but paid in another, it’s still recorded in the month it was incurred.
• Advantages:
  • Provides a more accurate picture of a business’s financial health because it matches income and expenses to the periods in which they occur.
  • Required for larger businesses and publicly traded companies by GAAP and is often preferred by businesses with complex operations.
• Disadvantages:
  • More complex and can be harder to manage, especially for small businesses.
  • This can make cash flow management more challenging since income may be recorded without actual cash on hand.

2. Cash Method

• How It Works:
  • Income is recorded only when cash is actually received. So in the example above, the income from a December sale would be recorded in January if that’s when payment is received.
  • Expenses are recorded only when they are actually paid. An expense incurred in December but paid in January would be recorded in January.
• Advantages:
  • Simpler and easier to understand, making it more manageable for small businesses and sole proprietors.
  • Better for cash flow management, as it reflects actual cash in hand, allowing business owners to see what they have available at any time.
• Disadvantages:
  • May not accurately reflect the financial position of the business over time because it does not account for income or expenses when they are earned or incurred.
  • Not accepted under GAAP for larger businesses or companies with inventory, as it doesn’t accurately match income and expenses in their respective periods.

Summary of When Each Method is Used:

• Accrual Method: Typically used by larger businesses, companies with inventory, and those that must comply with GAAP.
• Cash Method: Often used by small businesses, sole proprietors, and businesses that want a simple approach to track cash flow.

Each method has its own strengths, and the choice between them depends on the business’s size, complexity, and reporting needs.

Let’s simplify the above.  Most real estate agents use the cash method.  Record the expense when you incur it.  Record the income when it is received.  The accrual method is more complicated and is usually used for businesses that purchase goods and equipment.  

When you set up your Wave or other accounting system, be sure to set it up on a cash accounting method which is usually the default.  Now to make things a bit more cloudy, there may be times when you incur a debt and you do not need the tax deduction in that year.  See our explanation below:

Depreciation and amortization are two accounting methods used to allocate the cost of assets over time. Both help businesses gradually expense assets rather than taking the full cost as an immediate expense, but they apply to different types of assets.

1. Depreciation

• Definition: Depreciation is the process of allocating the cost of a tangible asset over its useful life.
• Applicable to: Physical, long-term assets (tangible assets) such as buildings, vehicles, machinery, and equipment.
• Purpose: It recognizes the wear and tear, obsolescence, or decline in value of physical assets over time, gradually expensing them to better match the cost with the revenue they help generate.
• Calculation Methods:
  • Straight-Line Depreciation: Expenses the same amount each year.
  • Declining Balance: Accelerated depreciation that expenses more in the early years of the asset’s life.
  • Units of Production: Based on asset usage or output, not time.
• Example: A business buys a $50,000 truck, which is expected to last 10 years. Using straight-line depreciation, the company would record $5,000 in depreciation expense each year.

2. Amortization

• Definition: Amortization is the process of spreading the cost of an intangible asset over its useful life.
• Applicable to: Non-physical, intangible assets such as patents, trademarks, copyrights, franchises, and goodwill.
• Purpose: Recognizes the reduction in value or benefit of an intangible asset over time, similar to depreciation but without physical deterioration.
• Calculation Method:
  • Straight-Line Amortization: Almost always used, as most intangible assets decrease in value evenly over their useful life.
• Example: A company acquires a 10-year patent for $100,000. Using straight-line amortization, it would expense $10,000 annually over the patent’s 10-year life.

Key Differences:

• Type of Asset: Depreciation applies to tangible assets, while amortization applies to intangible assets.
• Method Flexibility: Depreciation has several methods available, while amortization generally uses only the straight-line method.
• Residual Value: Tangible assets may have a salvage or residual value at the end of their useful life, while intangibles typically do not, so amortization expenses the entire cost over the asset’s life.

Both depreciation and amortization help businesses more accurately match costs with revenues, smoothing out expenses over time and better reflecting asset value and expense alignment with earnings.

To clarify the above.  You purchased a building to use as a real estate office.  You can depreciate the building over 27.5 years.  This allows you to take an annual deduction against income in the amount of 1/27th of the total cost of the building.  Another example of how both of the above can benefit you.  You buy new office furniture, printer, computer, etc.  The bill comes to $15,000.  You can deduct the entire amount in the first year but you do not need the deduction this year.  You can depreciate the $15,000 over for example three years.  This pushes out tax deductions that you can use in the coming years when you will have higher income. 

Accounting systems

Let’s leave the heavy stuff behind now and get into the actual accounting system.  Keeping it simple, you open your software and you will usually want to do one of two things.  Enter an expense or enter income.  You just purchased some new signs.  Open your system and enter the signs by entering the amount expended and an explanation that the amount is for signs.  You will have already prepared your system by entering typical expenses and typical income.  Hit the drop-down box to find “signs”.  You can enter the name of the entity that received the funds and notes.

Now go to your accounting system and enter your most recent commission check.  Hit the drop-down box select commission and enter the amount.  Keep in mind that you can also enter notes and sources of income.  The system will automatically add the amounts to the previous amounts.  All entries are automatically dated.  

Run a profit and loss report

At the end of each month, you can run a report “Profit and Loss” (income statements) to see how well you have done for the month and year to date.  By the way, when you are setting up your accounting system, you need to choose an accounting time period.  Your choices are calendar year (Jan-Dec) or some other 12-month period.  I strongly recommend the calendar year since that is how the tax season works for almost everyone.

You can eliminate most of the data entry by downloading your bank statement.  The free version of Wave does not allow an automated download but their first paid version does.  It’s a simple process.  Open your bank account online.  Select the period you want to download e.g. Jan 1 – February 28 and hit download.  There is a drop-down on the accounting page of Wave where you download the data.  It’s that simple.

All of your checks, ATM withdrawals, wire transfers, and deductions will drop into your system. The same is true of your income.  The accounting system will attempt to recognize the sources but it is often wrong.  Just go through and use the drop-down boxes to identify all items.  It’s really simple.

Describe the use of cash or receipt of cash

Ok, there are other things you may need to do.  Sometimes you pay cash for items.  You need to choose cash as the source of the funds you are expending.  The good thing is that you can describe the expense in detail hoping that the IRS will believe you.  Credit cards and other transactions are covered in the video on how to use Wave.  

Now that we have discussed your bookkeeping solutions, time to talk about physical receipts.  Easy, throw them all in a box.  Why? because you have recorded all of them.  If you need to find an actual receipt, you can look through your box based on the date of the transaction listed in your accounting system.    Another way to avoid the need for receipts is to use a credit card for all business expenses.  

Your credit card is a backup for your receipts.  This new accounting process that you are implementing will capture all business transactions and satisfy your accounting needs.  A successful real estate business must have a separate business account.  Those business accounts are attached to your accounting system.  The Wave system can manage savings, CDs, and other accounts.  Before you start to set up your accounting system, visit our page and print the list of expenses items such as membership fees.

The balance sheet

Before moving on, you should know about the balance sheet.  This is a report you can look at in your accounting system which shows your invested capital, and other details not shown on the profit and loss statement.  When you start your business, there are expenses before your first income.  To make the financial transactions work out, you need to deposit cash into your business account to cover the bills you will pay there.  This is considered equity or invested capital.  Your real estate accountant can explain more about this topic.

You should do a monthly review of your accounting system.  Download data from the checking account and review expenses to be sure you have all of them accounted for.  Those quarterly taxes you pay will be recorded as electronic deductions if you have used the IRS electronic pay system.

Resources for Accounting Systems that Real Estate Agents can use

Here’s a comparison of popular accounting system resources for real estate agents, with a focus on ease of use for someone new to accounting.

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1. QuickBooks Online

Best for: Agents who want a full-featured system with automation and integrations.
Ease of Use: 🟢🟢⚪⚪⚪ (Moderate learning curve)
Pros:
✔ Industry-standard with strong reporting features.
✔ Syncs with bank accounts, credit cards, and real estate software.
✔ Handles invoicing, tax tracking, and expenses.
✔ Mobile app available.
Cons:
❌ Monthly subscription ($30–$200/month).
❌ Can feel overwhelming for beginners.

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2. Wave Accounting (Wave Apps)

Best for: New agents looking for a free, simple system.
Ease of Use: 🟢🟢🟢🟢⚪ (Very beginner-friendly)
Pros:
✔ Free for basic accounting (income/expense tracking, invoicing).
✔ User-friendly dashboard.
✔ No experience is needed to start using it.
✔ Mobile app available.
Cons:
❌ No dedicated real estate tools.
❌ Customer support is limited.
❌ Payroll and payment processing have extra fees.

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3. FreshBooks

Best for: Independent agents focused on invoicing and tracking expenses.
Ease of Use: 🟢🟢🟢🟢⚪ (Beginner-friendly)
Pros:
✔ Easy invoicing with payment links.
✔ Simple expense tracking and reporting.
✔ Mobile app for on-the-go management.
✔ Integrates with real estate CRMs.
Cons:
❌ Limited scalability compared to QuickBooks.
❌ Subscription-based ($17–$55/month).

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4. Xero

Best for: Agents who want a QuickBooks alternative with strong automation.
Ease of Use: 🟢🟢⚪⚪⚪ (Moderate learning curve)
Pros:
✔ Strong bank reconciliation and automation.
✔ Cloud-based with integrations for real estate software.
✔ Supports multiple users at a lower cost than QuickBooks.
Cons:
❌ Can be complex for absolute beginners.
❌ Pricing starts at $15/month.

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5. Realtyzam (Specifically for Real Estate Agents)

Best for: Agents who want a real estate-focused accounting solution.
Ease of Use: 🟢🟢🟢🟢⚪ (Easy to use)
Pros:
✔ Designed for real estate professionals.
✔ Automatically categorizes commissions, expenses, and mileage.
✔ Generates tax reports easily.
✔ One-time payment option available ($9.95/month or $99/year).
Cons:
❌ Not as customizable as QuickBooks.
❌ No invoicing feature.

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Comparison Summary for New Users

Software	Best for	Ease of Use (1-5 🟢)	Price	Key Feature
QuickBooks	Full accounting with automation	🟢🟢⚪⚪⚪	$30+/mo	Advanced features & tax tracking
Wave	Free and simple bookkeeping	🟢🟢🟢🟢⚪	Free	Basic, beginner-friendly
FreshBooks	Invoicing & simple tracking	🟢🟢🟢🟢⚪	$17+/mo	Easy invoicing & reports
Xero	Automation & scalability	🟢🟢⚪⚪⚪	$15+/mo	Strong automation tools
Realtyzam	Real estate-specific accounting	🟢🟢🟢🟢⚪	$9.95/mo	Tracks commissions & expenses

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Best Picks for a New Real Estate Agent

• Best Free Option: 🏆 Wave Apps (Simple, no cost)
• Best for Ease of Use: 🏆 FreshBooks (Easy invoicing, reports)
• Best Real Estate-Focused: 🏆 Realtyzam (Tracks commissions)
• Best for Scalability: 🏆 QuickBooks Online (Advanced features)

Tax Return

Real estate agents must ensure that accurate reporting of their taxable income is completed on time.  Your accounting system will produce the data that your CPA requires to complete your tax return.  Not only must you pay your taxes quarterly during the year and file on time, but you should also create a tax strategy.  The data included in your accounting system will help you keep personal expenses separate from business expenses.  

Some if not many real estate agents with no second income fail to make their quarterly deposits or track their expenses.  Tax obligations must be taken seriously.  When you decide to spend that quarterly deposit instead of paying it, you set yourself up for failure.  One of the secrets of financial success as a real estate agent is to keep the IRS out of your life.  Tax regulations must be taken seriously.  The cost of “borrowing” from the IRS can be substantial.