Being a real estate agent, also known as a realtor, is like being the world’s friendliest gambler. You might sell a house for a client, you might buy a house for a client, or you might not. Either way, real estate agents have to keep smiling through it all. Smiling through challenges is a distinct advantage real estate agents have in an Illinois divorce.
Real estate agents are agreeable people who have wildly varying incomes. This creates a particular challenge when a realtor gets divorced because they want to make a deal…but cannot predict their income in order to sell that deal. Illinois realtors and their soon-to-be ex-spouses need to understand how Illinois divorce law impacts them in a divorce.
Realtors Income In An Illinois Divorce
Real estate agents do not collect a paycheck. Real estate agents receive commission checks from the sale or purchase of the properties they worked with. Those commission checks come in heavy during season (spring and summer) and barely come at all out of season (Illinois’ frigid winters).
Furthermore, not all years are created equally. A massive drop in interest rates in 2020 created a flurry of residential real estate transactions for the next year. Subsequent high rates have quashed demand while owners with 2020s low mortgage rates are loath to sell. In 2024, 71% of real estate agents did not close even one home.
In Illinois, child support and maintenance (formerly known as alimony) are based on both parties’ income. If one party is a real estate agent, how does an Illinois court determine their income when that income is changing every year?
Illinois divorce courts can guess at an average income for the purposes of support in a process called “imputation of income”
“If present income is uncertain, a court may impute income to the payor.” In re Marriage of Gosney, 394 Ill. App. 3d 1073, 1077 (Ill. App. Ct. 2009)
Imputing income to a real estate agent is almost always done by looking at past years’ income.
“[W]hen a party’s current income is difficult to ascertain or uncertain, a court may consider [the party’s] past earnings…Moreover, when a party’s income fluctuates from year to year, income averaging is an approved method to apply in determining the party’s current income.” In re Marriage of Gabriel, 2020 IL App (1st) 182710 (citations omitted).
If an Illinois divorce court does impute income to a real estate agent that court must use an average income of at least three years.
“[A]t least the three prior years should be used to obtain an accurate income picture.” In re Marriage of Freesen, 275 Ill. App. 3d 97, 104 (Ill. App. Ct. 1995)
A real estate agent or their soon-to-be-ex can argue that extreme years like 2021 or 2024 can be voided from consideration in the average imputed income.
“[A] court should not base its income calculation on outdated data that no longer reflect prospective income.” In re Marriage of Liszka, 2016 IL App (3d) 150238, ¶ 47
Because real estate agents incomes fluctuate so dramatically with little predictability, most real estate agents agree to a true up clause in their final divorce decree.
A true up clause typically reads that the parties will exchange tax returns and allow a third party, usually an accountant, to determine the parties incomes each year and to calculate the support owed for the upcoming year based on the past year’s determined income.
In Illinois, true ups cannot be ordered by any court. They must be agreed to. Failure to agree means that a court will impute income per the guidelines listed above.
Other Income Considerations For Real Estate Agents In An Illinois Divorce
Successful real estate agents often structure their businesses through an S-corp or an LLC. The commission checks pass through the S-corp or LLC, pay business expenses and then finally pay the real estate agent personally.
Tax returns like this are not only confusing to the non-real estate agent spouse but they are not determinative of income in an Illinois divorce.
“[I]n determining appropriate child support, we are not bound by the technicalities of federal income tax law.” In re Marriage of Ackerley, 333 Ill. App. 3d 382, 392 (Ill. App. Ct. 2002)
If you are a real estate agent or a real estate broker who is truly operating your business like a business, the court will consider your income as a business owner.
“For purposes of calculating child support, net business income from the operation of a business means gross receipts minus ordinary and necessary expenses required to carry on the trade or business.” 750 ILCS 5/505(a)(3.1)(Note: maintenance (formerly known as alimony) is calculated using the same rules as child support)
A real estate agent’s business expenses can be clearly deductible if they are license fees and continuing education expenses. But, real estate is a hospitality industry, expenses like closing gifts, mileage, dining with clients may not be allowed.
“[A]ny business expenses determined either judicially or administratively to be inappropriate or excessive shall be excluded from the total of ordinary and necessary business expenses to be deducted in the determination of net business income from gross business income.” 750 ILCS 5/505(a)(3.1)
In reality, real estate agents don’t have especially complicated business taxes and any debatable deductions usually are ameliorated by the fluctuating income issue discussed earlier.
Can You Be Your Own Real Estate Agent In Order To Sell Your Own House In An Illinois Divorce?
In a divorce, the house is often sold. Who better to sell the home than the real estate agent house?
The non-real estate agent spouse has already decided they do NOT want to deal with the real estate agent spouse and, therefore, may object to the real estate agent spouse listing the property.
In my experience, Illinois divorce judges want less drama not more drama and, in furtherance of that goal, will not allow a real estate agent spouse to list their own house.
The real estate agent spouse can remind the court that all assets earned during the divorce are still marital and thus divisible.
“[T]here is a rebuttable presumption that all property acquired by either spouse after the date of marriage but before the entry of judgment of dissolution is marital property, regardless of how title is held. ” In re Marriage of Didier, 318 Ill. App. 3d 253, 258 (Ill. App. Ct. 2000)
The real estate agent spouse can then argue that having a different real estate agent earn the commission off the house may amount to a dissipation of the marital estate.
“Dissipation is defined as the use of marital property for one spouse’s sole benefit for a purpose unrelated to the marriage at a time when the marriage is undergoing an irreconcilable breakdown.” In re Marriage of Tietz, 605 NE 2d 670 – Ill: Appellate Court, 4th Dist. 1992
Hiring a third party real estate agent may or may not be for one spouse’s sole benefit. Arguing this point will take some skill.
Real Estate Agents And Parenting Time In An Illinois Divorce
In addition to varying incomes, Real estate agents have varying schedules. Real estate agents usually work nights and weekends. This work schedule can cause complications for real estate agents seeking parenting time in an Illinois divorce.
An old Illinois appellate case said “one factor the court may consider is the effect of a parent’s work schedule on the ability to care for the child.” In re Custody of Blonsky, 405 NE 2d 1112 – Ill: Appellate Court, 1st Dist. 1980
In today’s Illinois divorces, parenting time is determined by the best interests of the child.
“The court shall allocate parenting time according to the child’s best interests.” 750 ILCS 602.7(a)
In an Illinois divorce, a child’s best interests are determined by a number of statutory factors. The non-real estate agent parent may argue that the real estate agent’s work schedule weighs against “the willingness and ability of each parent to place the needs of the child ahead of his or her own needs” 750 ILCS 5/602.7(b)(12)
That argument cuts both ways as real estate agents may work unusual hours but real estate agents can, usually, determine those hours and use other real estate agents in their brokerage to substitute for them during their parenting time.
In the end, unusual schedules are handled by Illinois divorce courts on a case-by-case basis.
The Illinois Supreme Court “has explained that a best interests determination `cannot be reduced to a simple bright-line test’ and that a ruling on the best interests of a child `must be made on a case-by-case basis, depending, to a great extent, upon the circumstances of each case.'” In re Marriage of Fatkin, 2019 IL 123602, ¶ 32, 129 N.E.3d 1230 (quoting In re Marriage of Eckert, 119 Ill. 2d 316, 326, 518 N.E.2d 1041, 1045 (1988)).
If a parent has been consistently present in a child’s life, a court will accommodate that parent’s work schedule. The “ability of the trial court to fashion a reasonable visitation schedule is especially important when a parent has assiduously exercised his or her visitation rights.” In re Marriage of Elliott, 665 NE 2d 883 – Ill: Appellate Court, 3rd Dist. 1996
More practically, the non-real estate agent parent previously accommodated the real estate agent parent’s work schedule while they were married…so, why can’t they post-divorce?
My personal experience with real estate agent clients is that real estate agents like to close deals. Divorce is just another deal that can and will be resolved amicably. If you’re a real estate agent or are married to one, contact my Chicago, Illinois family law firm to speak with an experienced Illinois divorce attorney.
