What is a Qualified Real Estate Agent (QREA)? IRC Section 3508 explained
A Qualified Real Estate Agent is a licensed real estate professional who is treated as an independent contractor for federal tax purposes under Internal Revenue Code Section 3508, regardless of how much control the brokerage exercises. Most commercial real estate brokers who are paid by commission are QREAs, whether or not their brokerage uses the term.
The three tests in Section 3508
The statute sets three conditions, and all three have to hold:
- Licensed. The person is a licensed real estate agent.
- Paid on output. Substantially all of their pay for real estate services comes from sales or output, meaning commissions, not hours worked.
- Written contract. The work is performed under a written contract stating the person will not be treated as an employee for federal tax purposes.
Meet all three and the brokerage doesn't withhold, doesn't pay its share of Social Security and Medicare, and reports the income on a 1099 rather than a W-2. The broker handles income tax, estimated payments, and retirement on their own.
Why the statute exists
Before 1982, the IRS and brokerages argued constantly over whether agents were employees. Brokerages set office rules, required floor time, and controlled listings, which looked like employment under the common-law test. Section 3508 ended the argument by carving out a statutory non-employee category for real estate agents and direct sellers. The brokerage can supervise; the agent is still self-employed for tax purposes.
What it means for a commercial broker
Being a QREA is the starting point, not the strategy. As a QREA paid personally, every dollar of net commission income carries self-employment tax, and retirement contributions are capped by the sole-proprietor rules. The status doesn't change; what can change is who gets paid. A QREA can direct the brokerage to pay a corporation the broker owns, and that is where an S Corporation, payroll, and the larger retirement limits come in.
How brokerages label it
Each firm has its own vocabulary for the same statute. CBRE uses "QREA Individual" for brokers paid personally and "QREA Corporation" for brokers paid through an entity, with an election window each fall to move between them. Cushman & Wakefield calls it a "3508 Broker," naming the code section directly. Other firms use "independent contractor," "IC," or "1099 broker." The tax treatment underneath is Section 3508 in every case.
Where to go from here
If you're at CBRE, our page on moving from QREA Individual to QREA Corporation covers the paperwork, the timing, and the numbers. If you're at another firm and paid on a 1099, the same logic applies; the labels just differ. Either way, the question is whether an S Corporation is worth it at your income level, and we'll tell you straight on a Fit Call.
