An example
For a 49-year-old residential agent paid on commission by a brokerage as an independent contractor, the 2026 figures work out like this:
- Cash balance plan, first year
- $191,000
- Solo 401(k) alongside
- $29,000
- Both plans
- $221,000
- A Solo 401(k) on its own
- $72,000
- Federal income tax saved
- $30,300
Federal income tax only, compared with making no retirement contributions. State tax saved depends on where you live: see savings by state. An illustration from the same calculation as the estimate, not a quote.
Real estate agents are generally not a specified service business for the 20% qualified business income deduction, so the deduction is not lost at higher incomes. A contribution reduces qualified business income, which trims the deduction a little. How the deduction interacts with contributions
How agents are paid, and why it matters
Federal tax law has a specific rule for licensed real estate agents. An agent whose pay for services is substantially all commission tied to sales, and who works under a written contract saying they will not be treated as an employee, is not an employee for federal tax purposes. Commission income under that arrangement is self-employment income, and it can support your own plan.
- Commissions paid to you on a 1099. Net earnings count, after expenses and the deduction for half of self-employment tax. See sole proprietors and single-member LLCs.
- Commissions paid to your S corporation. Only the W-2 salary the corporation pays you counts. See S corporation owners.
- Salary from a brokerage or builder. Wages from that employer. Not for your plan.
- Rental income from property you own. Not earned income. It cannot support a contribution.
Teams, assistants and other businesses
An assistant or transaction coordinator on your own payroll is an employee, and a one-person plan stops fitting once they meet the plan's age and service conditions. Licensed agents on a team who are independent contractors paid through the brokerage are generally not your employees, though, as with anyone, the IRS looks at who controls the work rather than the label.
A broker who owns a brokerage with salaried staff, or with agents who are treated as employees, has employees. The brokerage's own plans are the route there, not a one-person plan.
Agents often own other real estate businesses. Owning 80% or more of a property management company or other business with staff, counting family ownership, can make its employees count as yours. See who can have a solo cash balance plan.
Planning around commission swings
A cash balance plan requires a minimum contribution every year. For an agent, that means sizing the plan to a typical year, not a peak one. Setting pay credits below the maximum lowers the minimum; contributing toward the top of the range in strong years can lower later minimums; and a plan can be amended to reduce future pay credits, which usually has to be done early in a year. See minimum contributions and lean years.
Timing is simpler for an agent paid as a sole proprietor. Plan compensation is worked out from the year's net earnings after the year ends, so a December closing counts without anything needing to happen by December 31. An agent with an S corporation has to run the year's salary through payroll by December 31.
Not a specified service
Brokerage services are on the specified service list, but the regulations say that does not include real estate agents and brokers. So an agent can keep a QBI deduction above $553,500 of taxable income for a married couple ($276,750 single), subject to a limit based on W-2 wages paid. A sole proprietor agent with no employees pays no W-2 wages, so above that range the deduction is usually small or nothing, and while income stays above the range, a contribution saves tax at the full marginal rate. See the QBI deduction and retirement contributions.