1. What is the Real Estate Commission Formula?

The real estate commission formula calculates the net amount an agent earns after accounting for capital gains tax and any applicable exemptions. This 2025 version includes updated tax considerations and exemption rules.

2. How Does the Calculator Work?

The calculator uses the following formula:

Where:

• Sale Price — Total property sale amount in dollars
• Commission Rate — Percentage agreed with the brokerage
• Capital Gains Tax — Tax on profit from the sale
• Exemption — Any applicable tax exemptions

3. Understanding Capital Gains Tax and Exemption

Capital Gains Tax: This is calculated based on your profit (sale price minus original purchase price and improvements). The 2025 rates vary by income bracket and holding period.

Exemptions: May include primary residence exclusion (up to $250,000 single/$500,000 married) or other specific exemptions available in 2025.

4. Using the Calculator

Tips: Enter all values in dollars except commission rate (percentage). For accurate results, use your actual capital gains tax liability and any exemptions you qualify for.

5. Frequently Asked Questions (FAQ)

Q1: How is commission typically split between agents?
A: The total commission is usually split between listing and buyer's agents (often 50/50), then each agent splits with their brokerage.

Q2: Are commissions negotiable?
A: Yes, commission rates are always negotiable between the seller and listing agent.

Q3: What's the average commission rate in 2025?
A: While rates vary, the national average remains around 5-6% of the sale price.

Q4: How does capital gains tax affect my net?
A: The tax reduces your net proceeds, while exemptions can offset some of this liability.

Q5: When are exemptions applicable?
A: Primary residence exemptions apply if you've lived in the home 2 of last 5 years. Other exemptions may apply for certain situations.