You are here:

Tax Law (Questions About Taxes)/Real Estate Commission Rebate

Advertisement


rebate agent wrote at 2009-12-23 19:18:59
I suggest you contact the IRS... I did as an agent who gives rebates to my buyer clients.  The IRS told me I have no responsibility to send 1099s since the rebate is not any form of earned income to the buyer. However i tell all of my clients that they must contact their own tax professional to deal with the cost basis for tax reporting.


AP wrote at 2010-02-05 13:24:58
That is simply not true.  It is not considered income by the IRS.  Redfin, probably the biggest issuer of these rebates requested an official opinion from the IRS.  http://www.bostoncondoloft.com/commission-rebates-not-taxable-says-irs/



I am dealing with the same problem.  I didn't buy through Redfin, and now I have a 1099-MISC that claims I earned non-employee compensation.  The issue is that the IRS does not consider it income, but the agent issued a 1099 that makes it appear as though it is.  I'm also trying to figure out how to reconcile my 1099 in this unique situation.  It seems like there are only 2 choices - disregard it since it's not income, in which case the IRS will likely request additional information in the future when my reporting doesn't match their records.  Or fill out a schedule C and cancel the expense out so that it nets zero.  I'm waiting for advice from someone at the IRS on this subject.  The problem with the schedule C route is that apparently their computer will likely think you have a business and they'll wonder why you don't file schedule C in the future and pay self employment tax.


nottaxable wrote at 2010-03-04 00:27:35
John's advice here is not entirely correct.  The IRS ruled in 2006/2007 that commmission rebates are not taxable to the buyer of the home.  A 1099 should not be sent to the buyer for this type of transaction.  Here's an article referencing the ruling.



http://www.bostoncondoloft.com/commission-rebates-not-taxable-says-irs/



The OP is correct in that the rebate simply reduces the cost basis on the purchase price of the home.  


Stuart B. Scholer wrote at 2011-02-04 07:32:35
To Clarify; The Buyer's Agent was paid by the Seller. Many times the circumstances will not allow that the sales price be altered in lieu of the Buyer's Agent taking less commission. On the other hand many times the Rebate will be paid at the closing table before monies are disbursed and the Rebate shows up on the Final Settlement Statement (HUD-1) as a "Realtor paid contribution towards closing costs". The Buyer's Agent may have to write a check after closing to fulfill his contractual obligations with his Client. In effect, however it is done, the Buyer's Agent is lowering the cost of doing business with his Client. If a Buyer of a new TV receives a Rebate it is not considered income. It is considered a price reduction. If a new car buyer receives a $2000 Rebate from the Manufacturer it is not considered income. It is considered as a price reduction. The purchase of the house should reflect a lower basis on accout of the Rebate. That is the jist of the Redfin article. It makes sense to me although I don't know if it is definitive with the IRS. I am a Realtor in Texas and I have been doing this for 6 years now.  


Mark wrote at 2013-03-17 05:56:37
I respectfully disagree.  Please see



http://www.irs.gov/pub/irs-wd/0721013.pdf

http://www.getarebaterealestate.com/about_the_rebate_116454.html

http://blog.redfin.com/blog/2007/03/the_taxman_does_not_cometh.html

http://www.trulia.com/blog/chnaamad/2011/05/tax_practices_for_real_estate_commis




Tax Law (Questions About Taxes)

All Answers


Answers by Expert:


Ask Experts

Volunteer


John L. Tidwell

Expertise

Unemployment tax law both state and federal; determination of employer employee relationship; the usual 20 commonlaw factors for making that determination; and what makes me a liable employer.

Experience

Over 20 years of field audit experience with a state agency

Organizations
none

Publications
none

Education/Credentials
Degree in Accounting from Falls Business College

©2016 About.com. All rights reserved.