Is buyer cashback from realtor on home purchase taxable?

[sanju-dabi]

Is buyer cashback from realtor on home purchase taxable?

[AmyC]

No.

[sanju-dabi]

Below is what my realtor is saying and would either deduct tax and give cash back or issue 1099:

If you did that to adjust the price or used towards closing cost then yes. its not as income.

In your case you used portion of it towards your closing costs, not to adjust your purchase price.

So the remaining amount will be taxable.

Here is situation:

From total cash back A, amount B was given towards closing cost and amount C is what realtor is supposed to give as cash. Per realtor amount C is subject to tax.

What happens if my realtor issues 1099, is there a way to make it non-taxable?

[Opus 17]

@sanju-dabi 

You are either getting a rebate of the real estate commission, or you got a reduction in the price of the house. Neither is taxable income to you now. It is treated as a reduction in the price of the house, and you will take that into account as part of your capital gains calculation when you eventually sell the house.

If the agent issues a 1099 – MISC, there are two ways to handle it.

1. The long term IRS recommendation is to leave the 1099 off your tax return. File by mail, and attach a copy of the 1099 and a letter explaining why it is not taxable income. Don’t include detailed proof, but keep that in your records for at least three years. However, with the rise of e-filing and the fact that the IRS is so backlogged with paper returns this year, there is an electronic procedure that seems to work for most people.

2. Enter the 1099 as miscellaneous or “other“ taxable income. Then go back to the other taxable income section and create a new item of other income in a negative amount (minus sign) to offset the income from the 1099. Label the negative item as something like “adjustment for non-taxable real estate rebate.“. You will be able to e-file. Keep proof of the situation for at least three years in case the IRS asks for more details.