Entry by Lester Langdon

1099s for buyer commission rebates - NOT


Tax reporting for commission rebates

In today's difficult housing market it has become commonplace for brokers to offer buyers a cash rebate of a portion of their commission. A common question many brokers and buyers have is whether such rebates are taxable income that must be reported to the IRS on Form 1099-MISC. The answer is no.

The IRS says that a cash rebate paid to a buyer of property at or after closing is an adjustment in the price, and is therefore not taxable income to the buyer. Rather, the buyer should subtract the amount of the rebate from the home's basis. This will, of course, increase any potential profit when the home is sold.

Since they are not taxable income, such rebates need not be reported on Form 1099-MISC. Thus, brokers should not send 1099s to buyers reporting such rebates. Any buyer who has received a 1099 that reports such a payment in error should ask the broker to correct or withdraw it.

Stephen Fishman is a tax expert, attorney and author who has published 18 books, including "Working for Yourself: Law & Taxes for Contractors, Freelancers and Consultants," "Deduct It," "Working as an Independent Contractor," and "Working with Independent Contractors." He welcomes your questions for this weekly column.



Not Lester, Thats a great find you didnt write, thanks for not writing it!  Great infromation to have our hands on.  Mollie, do we have a star we can give Lester for his "Unman" news reporting?

Very good news!  Thank you for updating us!

Not Lester, Can I repost this?

This page contains a single entry by Lester Langdon published on May 6, 2011 9:18 AM.

California's "Advance Fee" laws was the previous entry in this blog.

Inman study on Real estate agent compensation here linked is the next entry in this blog.

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