Rebate of real estate commission to buyer. Is it taxable or not?

I'm not a tax guy but I don't see how it could be taxable income. It's not income at all (you had it to begin with it

- didn't newly come your way). You simply got some of your money back - it reduced your cost. You paid ten dollars for something and got two back so your net cost was eight and the two is back where it came from - your pocket. Maybe it's an interest free loan but that seems a stretch. Seems like it should be no different than buying a thingy-bob at Staples and getting a two dollar rebate check some time down the road. But then again I'm not a tax dude. Geo.

The "rebate" is a reduction of your buying price or cost basis. It may increase your gain when you sell, but is not currently taxable.

First I assume this is all disclosed on the closing setlement statement? If not, it could be fraudulent and I would seek legal advice.

If disclosed then it reduces the cost basis of your property, but is not taxable income.

If you received it for no other reason than that you purchased the house, then it's a reduction in the purchase price (basis). If you received it in exchange for something you did for the agent, it's taxable income. Seth

The "rebate" is a reduction of your buying price or cost basis. It may increase your gain when you sell, but is not currently taxable.

The "rebate" is a reduction of your buying price or cost basis. It may increase your gain when you sell, but is not currently taxable.

First I assume this is all disclosed on the closing setlement statement? If not, it could be fraudulent and I would seek legal advice. If disclosed then it reduces the cost basis of your property, but is not taxable income.

If you received it for no other reason than that you purchased the house, then it's a reduction in the purchase price (basis). If you received it in exchange for something you did for the agent, it's taxable income. Seth

I'm not a tax guy but I don't see how it could be taxable income. It's not income at all (you had it to begin with it

- didn't newly come your way). You simply got some of your money back - it reduced your cost. You paid ten dollars for something and got two back so your net cost was eight and the two is back where it came from - your pocket. Maybe it's an interest free loan but that seems a stretch. Seems like it should be no different than buying a thingy-bob at Staples and getting a two dollar rebate check some time down the road. But then again I'm not a tax dude. Geo.

See:

According to Fannie Mae guidelines and federal laws, all credits must be given on the settlement statement (not after closing). Failure to disclose the payment to the buyer on the settlement statement can constitute a "false statement to a lender" (a federal crime), and also a violation of the License Law and Commission rules. You can read what a state real estate commission wrote about this federal statute. As long as the rebate is listed on the HUD-1, it is perfectly fine in the majority of states, and most lenders do allow the rebate on the HUD-1. However, if your lender will not allow the rebate on the HUD-1, then the only way for you to get the credit would be to have the seller lower the sales price by the amount of the rebate. It is the buyer's responsibility to ensure they have selected a lender who will allow the rebate on the HUD-1 statement.

I asked this same question last year and got exactly the opposite advice. I was told that I had to report it as income because the sales agent had issued a 1099. I even had a tax preparer locally, try to imply that I was committing fraud by treating it as a reduction of basis. I ended up paying the tax on it and am not too happy about it. When you think about it, the money received is really part of your downpayment handed right back to you.

-- Joe Leikhim K4SAT "The RFI-EMI-GUY"©

"Treason doth never prosper: what's the reason? For if it prosper, none dare call it treason."

"Follow The Money" ;-P

It could be if it was in exchange for work.

For instance, OP built a web site for the agent, and the compensation was a rebate on the agent's commission when OP bought a house through that agent. I'd think that rebate would be taxable income, not a price discount. Seth

Yup. What I said.

Is this the thread you are referring to?

Both of the responses you got in this group agreed that it was a reduction of your purchase price, not income to you. That seems to be the same advice as in this current thread, not the opposite. I don't see either of them telling you that you had to report it as income. They both said that the

1099 should not have been issued, and suggested that you try to get the agent/broker to correct it.

Maybe you should find a different tax preparer.

Bob Sandler

It could be if it was in exchange for work.

For instance, OP built a web site for the agent, and the compensation was a rebate on the agent's commission when OP bought a house through that agent. I'd think that rebate would be taxable income, not a price discount. Seth