From: Diamond Springs, CA

Dear TaxMama,

I am a new Realtor™ about to do my 1st deal of the year.

My question is, I am rebating my seller 1% of the sales price, $4,900.

I need this as a business deduction and wanted to put it on a 1099 form at end of year. Is this the best way to be able to claim it as a business expense?

If not what would you suggest?

Thank You

Phoebie

 

 

Dear Phoebie,

WOW! Congratulations.  How wonderful for you.

If you can, arrange to give them the rebate IN ESCROW.

That way, your net check will be lower and you won't be reporting the income at all.

If you take the money and THEN pay them, you're going to have to issue them a 1099-MISC for each rebate that's over $600 in order to be able to use the deduction.

And that, my friend will open up a whole can of worms you don't even want to start opening.

Remember, tax considerations aside, it will look like a commission, and California RE license law says you can't pay commissions to anyone who isn't licensed.

And tax law says you must issue 1099s, or you could be penalized, lose the deduction or both.

Other than that, you're just fine....

I know, you're trying to show your commissions at the highest level possible. But it won't work from this angle.

However, you may want to sit down with a good, local tax pro and do some brainstorming on the best way to make this work for you.

Good luck!

Best wishes,
Eva Rosenberg Your TaxMama