Can a TX RE broker, who gave a commission rebate to a home seller after closing, deduct that rebate somewhere on Sch C for '17? Closing was in '17. Rebate paid in '18.

[dipchips]

Would cancelled checks suffice as documentation, since the rebate was paid after closing with no written agreement.

[KatherineC]

Unless you report your Schedule C income on the accrual basis of accounting, you cannot deduct a payment you made in 2018 on your 2017 return.

Most individuals report their income on the cash basis of accounting - they report income in the year it is received and their expenses in the year they are paid.

You would be using the accrual basis of accounting if you have accounts receivable and accounts payable.  This would mean that you report income in the year the income is earned whether you have been paid or not and the same with the expenses.

Your basis of accounting is disclosed on Schedule C, Line F.  (Please see the screenshot below)

[dipchips]

Thank you. Can I deduct the commission rebate paid in 2018 on my 2018 return even if I have no Schedule C commission income in 2018? In other words, can I generate a Schedule C loss in 2018 with the commission rebate (and other expenses) I paid in 2018 (on a 2017 sale) even with zero real estate business income for 2018? Thank you very much.

[KatherineC]

You can do that.