How to Use Our Commission Calculator
Provide the following details to calculate your earnings from a sale. This tool works for salespeople, real estate agents, recruiters, and any professional who earns a commission.
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Sale Amount: Enter the total value of the sale or the revenue amount that your commission is based on. For real estate, this is the final sale price of the property.
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Commission Rate (%): Input the commission percentage you earn from the sale. For example, for a 3% commission, you would enter “3”.
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Commission Split (%): (Optional) If you share the commission with a team, brokerage, or another partner, enter the percentage you personally keep. For instance, if you have a 70/30 split with your brokerage, you would enter “70”. If you keep 100% of the commission, leave this field at 100.
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Base Salary: (Optional) If you receive a fixed salary in addition to your commission, enter the amount for the corresponding pay period to calculate your total earnings.
Understanding Your Results
Your final commission is calculated in a clear, step-by-step process. Our calculator breaks down your earnings so you can see exactly how your pay is determined.
The final result shows your Total Estimated Earnings for the period, which is a pre-tax figure. Here is how we arrive at that number:
Important Note: The result shown is your gross earning (pre-tax). Your actual paycheck will be lower after federal and state income taxes, and FICA taxes (Social Security and Medicare) are deducted.
Frequently Asked Questions
What are the different types of commission structures?
While a flat-rate percentage is common, several other structures exist. Understanding them is key to evaluating job offers and forecasting your income.
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Flat-Rate Commission: You earn a fixed percentage of every sale. This is the most straightforward structure.
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Tiered Commission: Your commission rate increases as you reach certain sales targets. This incentivizes top performance. (See example below).
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Residual Commission: You continue to earn a commission for as long as an account you signed continues to generate revenue (common in insurance or software-as-a-service).
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Draw Against Commission: You receive a guaranteed base payment (a “draw”) that is essentially an advance on future commissions. You must “pay back” the draw with the commissions you earn before you start taking home additional cash.
How do I calculate a tiered commission?
A tiered commission structure pays different rates for different portions of a sale or total sales volume. You must calculate the commission for each tier separately and then add them together.
Concrete Example: Your company offers a tiered structure on a single large deal:
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Tier 1: 5% on the first $50,000
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Tier 2: 8% on the next $50,000 (from $50,001 to $100,000)
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Tier 3: 12% on anything over $100,000
You close a $175,000 deal. Here is the calculation:
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Tier 1 Commission: $50,000 \times 5% = $2,500
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Tier 2 Commission: $50,000 \times 8% = $4,000
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Tier 3 Commission: ($175,000 - $100,000) \times 12% = $75,000 \times 12% = $9,000
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Total Commission: $2,500 + $4,000 + $9,000 = $15,500
What is a “draw against commission” and how does it work?
A draw against commission is a payment system designed to provide salespeople with a stable income while they build their sales pipeline. The company pays you a set amount each pay period (e.g., $2,000/month). This is not a salary; it’s an advance.
If you earn $3,000 in commission that month, you first “pay back” the $2,000 draw, and your take-home commission is $1,000. If you only earn $1,500 in commission, you have a negative balance of $500 that you must cover with future earnings. A “recoverable draw” means you owe the company for any shortfall, while a “non-recoverable draw” is more like a base salary.
How are commissions taxed?
Commissions are taxed as ordinary income, but the specifics depend on your employment status.
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W-2 Employees: Your employer will withhold taxes from your commission check, just like a regular salary. Commissions are often subject to a flat supplemental withholding rate of 22% by the IRS.
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1099 Independent Contractors (e.g., most Real Estate Agents): You receive the full, pre-tax commission. You are responsible for paying your own income taxes and self-employment taxes (Social Security and Medicare, currently 15.3%). It is crucial to set aside 25-35% of every commission check for quarterly estimated tax payments to the IRS.
What expenses can I deduct if I am a 1099 commission-based contractor?
As an independent contractor, you are running a business, and you can deduct ordinary and necessary business expenses to lower your taxable income. Common deductions include:
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Vehicle Mileage: The standard IRS mileage rate for business-related driving.
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Home Office Deduction: A portion of your home expenses if you have a dedicated workspace.
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Marketing & Advertising: Costs for business cards, flyers, website hosting, online ads, etc.
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Licensing & Dues: Real estate license renewal fees, MLS dues, and association fees.
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Supplies: Phones, computers, CRM software, and other office supplies.
Always consult with a tax professional to ensure you are tracking and claiming deductions correctly.
Plan Your Financial Future
Now that you’ve calculated your pre-tax earnings, see how they fit into your overall financial plan with our Monthly Budget Calculator. If you’re saving up for a big purchase, use our Savings Goal Calculator to map out your timeline.
