From Commission to Capital: Optimizing the Agent-Flipper Portfolio
The Challenge
A successful real estate agent expanded her business into fixing and flipping properties. While her income grew to over $400,000, so did her tax bill. She was operating as a Sole Proprietor, paying maximum Self-Employment Tax on every dollar of profit.
Worse, her previous accountant was taking the "easy route" on deductions. They used the standard mileage rate for her vehicle and only deducted expenses listed on the closing statements (HUD-1/ALTA), completely missing thousands of dollars in out-of-pocket costs.
The Solution
We treated her business like the high-growth enterprise it was, implementing a three-part plan:
Entity Restructuring (The S-Corp Shift): We restructured her business into an S-Corporation. By paying her a reasonable salary and taking the remaining profit as distributions, we legally eliminated over $12,000 in Self-Employment taxes immediately.
Vehicle Strategy (Actual vs. Mileage): Since she upgraded her car every 2 years to drive clients, the standard mileage rate was leaving money on the table. We switched her to the "Actual Expense" method. Because her new luxury SUV weighed over 6,000 lbs, we utilized Section 179 and Bonus Depreciation to write off over 80% of the vehicle's cost in Year 1—a massive deduction compared to pennies per mile.
The "Hidden" Deductions (Staging & Prep): We audited her bank statements against her brokerage statements. We found $15,000 in staging furniture, photography, and minor repairs that she paid for by credit card outside of closing. These were valid deductions her previous CPA missed because they weren't on the settlement sheet.
The Result
The combination of S-Corp tax savings, optimized vehicle depreciation, and capturing missed deductions reduced her taxable income significantly.
Total Year 1 Savings: $38,400 in real cash.
Future Impact: She now has a scalable entity structure that saves her money every single year she continues to flip and sell.