How a real estate commission check is worked out
The commission on the listing sheet isn't what lands in your account. Your side of the commission (your GCI, gross commission income) goes through a few deductions first, and the order matters:
Plans differ. Some brokerages take fees before the split, some charge a post-cap fee, and some teams take their share before the brokerage does. If your plan works differently, use this as a close estimate and check your brokerage's commission disbursement form for the exact order.
Worked example: the closing that hits your cap
You sell a $400,000 home at 2.5%, so your GCI is $10,000. You're on an 80/20 split with a $16,000 annual cap and you've already paid $15,000 toward it. Your brokerage also charges a 6% royalty capped at $3,000 (you've paid $1,500), a $395 transaction fee and a $50 E&O fee.
| Step | Amount |
|---|---|
| GCI ($400,000 × 2.5%) | $10,000 |
| Brokerage split (20% would be $2,000, but only $1,000 is left on the cap) | −$1,000 |
| Royalty (6% of $10,000) | −$600 |
| Transaction + E&O fees | −$445 |
| Net to you | $7,955 |
That's 79.6% of GCI. Because this closing hits the cap, every closing after it skips the split entirely until your cap year resets, which is why the last few months of a cap year can pay so much better than the first few.
Split, cap, royalty: the terms in plain English
- Split: how GCI is shared with the brokerage. "80/20" usually means you keep 80% and the brokerage keeps 20%.
- Cap: the most you pay the brokerage in split for the year. Once you've paid it, you keep 100% of the split portion (minus fees) until your cap anniversary.
- Royalty / franchise fee: charged by franchise brands on top of the split, often 6% of GCI with its own annual cap.
- Transaction and E&O fees: flat per-closing fees for compliance and errors-and-omissions insurance. Many continue after you cap.
- Referral fee: if another agent sent you the client, they usually get 20–35% of your side, taken off the top.
Plan your year around the cap
Divide your remaining cap by the split on a typical closing to see how many more closings it takes to cap. If you're close at the end of your cap year, pulling a closing forward can change what you net on it.
FAQ
How do I calculate my net commission as a real estate agent?
Multiply the sale price by your side's commission rate to get GCI. Subtract any referral fee, then the brokerage split (limited by what's left on your cap), any royalty or franchise fee, and per-closing fees like transaction and E&O. What's left is your net before taxes.
What does an 80/20 split with a cap mean?
You keep 80% of your GCI and the brokerage keeps 20% until the total you've paid the brokerage for the year reaches the cap. After that you keep the full amount, minus any fees, until your cap year resets.
Do I still pay fees after I cap?
Usually yes. Most brokerages still charge transaction and E&O fees after you cap, and some add a post-cap fee per closing. Royalty fees usually have their own separate cap.
Are real estate commissions taxed?
Most agents are independent contractors, so nothing is withheld. You'll owe income tax and self-employment tax, often paid quarterly. Many agents set aside 25–30% of each check. Ask a tax professional for your situation.