The New Jersey S Corporation Guide for Commercial
Real Estate Brokers

INTRODUCTION:

For years, commercial real estate brokers in New Jersey have been unable to receive commission income through an S Corporation

This restriction stemmed from the New Jersey Real Estate Commission (NJREC), which prohibited unlicensed entities from receiving commissions from real estate transactions. Consequently, brokers and agents affiliated with brokerage firms were required to receive commissions as individuals.

This is now changing. In November 2022, the initial steps toward allowing S Corps for CRE brokers began, and as of January 2025, the process is nearing completion. Official guidance from NJREC is expected imminently, opening new opportunities for brokers to optimize their tax structures and retain more of their income

What is an S Corporation?

An S Corporation is a federal tax classification that allows a business entity to pass income, deductions, and credits directly to its shareholders, avoiding corporate income tax. To elect S Corp status, you must first establish a legal business entity—typically a Limited Liability Company (LLC)—and obtain an Employer Identification Number (EIN). You then file IRS Form 2553 to elect S Corporation taxation.

As of December 22, 2022, New Jersey automatically recognizes federally approved S Corporations. Once an entity is approved as an S Corp by the IRS, New Jersey will treat it as such for state tax purposes, provided the entity is properly registered with the New Jersey Division of Revenue and Enterprise Services

Benefits of an S Corporation for CRE Brokers

There are three primary tax benefits of electing S Corporation status:

1. Self-Employment Tax Reduction

As a W-2 employee of your S Corp, only your salary is subject to self-employment taxes (i.e., payroll taxes). The remaining net income is passed through to you as a shareholder and is not subject to self-employment tax.
Since your salary is typically lower than your total commission income, you can significantly reduce the amount subject to Social Security and Medicare taxes.

2. Qualified Business Income (QBI) Deduction

The Tax Cuts and Jobs Act of 2017 introduced a 20% QBI deduction on pass-through business income. This means 20% of your S Corp’s net income may be deductible on your personal tax return, reducing your federal tax liability.
However, there are income limitations and specific requirements to maximize this deduction, making tax planning essential.

3. Pass-Through Entity Tax (PTET) Program

The State and Local Tax (SALT) deduction cap introduced in 2017 limited personal tax deductions for state taxes to $10,000.
New Jersey’s PTET program allows an S Corp to pay state income taxes on behalf of its shareholders, converting these taxes into deductible business expenses. This effectively restores the deductibility of state taxes for federal tax purposes.

Additionally, an S Corp structure enhances retirement savings opportunities through 401(k) contributions. As a W-2 employee, you can contribute to a Solo 401(k) and receive additional employer profit-sharing contributions, enabling larger retirement savings, in many cases, than what is possible with a SEP-IRA as a sole proprietor.

How Much Can You Save?

Your tax savings depend on several factors, including:

Your commission income
Other taxable income sources
Your tax filing status

While savings vary, brokers earning over $100,000 in net commission income often find the S Corp structure highly beneficial.

To see real-world examples, view our case study here:

CASE STUDIES

Tax Filing and Compliance Requirements

Operating an S Corporation comes with additional tax reporting obligations:

1. Federal Tax Return (Form 1120S)

Reports income and expenses
Issues a Schedule K-1 to shareholders, reflecting their share of income.

2. New Jersey State Tax Filing (Form CBT-100S)

Required annually to report income and calculate tax liabilities
Subject to a minimum state tax based on gross receipts:

Gross Receipts	Minimum Tax
Less than $100,000	$375
$100,000 - $250,000	$562.50
$250,000 - $500,000	$750
$500,000 - $1,000,000	$1,125
Over $1,000,000	$1,500

Gross Receipts	Minimum Tax
Less than $100,000	$375
$100,000 - $250,000	$562.50
$250,000 - $500,000	$750
$500,000 - $1,000,000	$1,125
Over $1,000,000	$1,500

New Jersey does not impose corporate income tax on S Corporations beyond this minimum tax, as income is passed through to shareholders and taxed at the individual level.

Take the Next Step

Setting up an S Corporation requires careful planning to maximize tax benefits while ensuring compliance. If you're ready to make the transition, download our step-by-step guide on setting up an S Corp in New Jersey:

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For personalized assistance, schedule a consultation to discuss how an S Corp can work for you.

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Conclusion

An S Corporation can be a powerful tax-saving tool for commercial real estate brokers in New Jersey, but it comes with added administrative responsibilities. With the right professional support, you can delegate these tasks and focus on growing your business. Before making the switch, ensure you have a knowledgeable team in place to help you navigate the process.

Our firm specializes in S Corp management, tax strategy, and business consulting for CRE brokers. If you're considering this transition, we’re here to help. Schedule a call today to see how an S Corp can benefit your business.

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The New Jersey S Corporation Guide for Commercial Real Estate Brokers