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Visitor II

Who is responsible for taxes on a Commission rebate ?

I just signed a contract of house sale. My buyer agent said she will credit me 1% of her commission at closing and she claim that she still has to pay 25% of tax on the commission rebate. Is it true? Is a commission rebate taxable to her?

1 Comment
Catalyst V

Who is responsible for taxes on a Commission rebate ?

All income from all sources is reportable on a tax return. Weather it's taxable or not is another matter. Any monies you receive as the buyer, and it doesn't matter what you call it, be it a rebate, credit, or anything else, subtracts from your cost basis in the property you are buying. So if you purchase the property for $100,000 and the agent gives you back $1000 of their commission, your cost basis in the property is $99,000 and your agent will not pay taxes on that $1,000 they give back to you. (That is, unless they want to. The IRS does not have a problem with people paying taxes on money they don't keep, and will gladly accept their tax payment for it.)

 

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