New Jersey Bill S3590 Allows Realtors to Elect S-Corporation Status - Here’s Why It Matters

What we’ll cover:

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• Background: Why Realtors in NJ Couldn’t Use LLCs (Until Recently)
• The Game-Changer: Bill S3590 (2021)
• Why It Matters: A Triple Win for NJ Realtors
• Summary
• References

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📜 Background: Why Realtors in NJ Couldn’t Use LLCs (Until Recently)

For years, New Jersey real estate professionals were boxed into an outdated restriction: state law prohibited licensed real estate salespersons and brokers from receiving commissions through LLCs. This meant every dollar earned had to flow directly to the individual — eliminating access to entity-based tax strategies that are common across other professions.

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No S-Corp elections. No income splitting. No PTET workarounds.

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✅ The Game-Changer: Bill S3590 (2021)

That all changed when Bill S3590 was signed into law, taking effect in 2021. This legislation finally allowed real estate licensees to form sole-owner entities — like LLCs — to receive commission income, provided the entity is registered with the Real Estate Commission.

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Even better: once the LLC is set up, you can elect to be taxed as an S-Corporation. That single election opens the door to advanced tax planning that was previously off-limits.

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📎 View Bill S3590 on NJ Legislature Website

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💰 Why It Matters: A Triple Win for NJ Realtors

If you’re earning six figures as a realtor, here’s what this unlocks:

1. Reduce Self-Employment Tax

With an S-Corp, income is split between:

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• Salary (subject to Social Security and Medicare tax)
• Distributions (not subject to Social Security and Medicare tax)

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This split can save $10K–$20K+ per year in FICA taxes, depending on your income.

2. Supercharge Retirement Savings

S-Corp owners can contribute to:

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• Solo 401(k)s
• SEP IRAs

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That means tax deductions today and tax-deferred growth for the future — a win-win.

3. Use New Jersey’s PTET to Bypass the SALT Cap

The Pass-Through Entity Tax (PTET) allows S-Corps to pay state taxes at the entity level — and deduct them on your federal return. That’s huge for anyone paying more than $10K in NJ taxes (which is… most of us).

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📌 Summary

New Jersey realtors now have access to tools that were off-limits just a few years ago.

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Thanks to Bill S3590, you can:

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• Operate through an LLC
• Elect S-Corp tax treatment
• Save big on taxes and boost retirement

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If you’re still receiving commissions in your own name, it’s time to consider an upgrade.

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References

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NJ Bill S3590 (2021)