Author Topic: Rebate on New home purchases - Discuss  (Read 82091 times)

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Offline marmott

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Re: Rebate on New home purchases - Discuss
« Reply #210 on: September 23, 2017, 11:33:23 AM »
I don't think so.

Being contingent or not being a cash buyer will have more influence.

Offline USCTrojanCPA

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Re: Rebate on New home purchases - Discuss
« Reply #211 on: September 23, 2017, 08:33:42 PM »
We are interested in one of the new communities that will be opening in Irvine.  If we bring in an agent on our pre-grand opening visit, will this hurt our chances in getting the lot we want (sales agent puts us lower on priority list)?

Absolutely not, I don't know why people think this.  Your place on the wait list is determined when you pre-qualify with the builder's lender (either for a loan or show them your statements if you are a cash buyer) via calling or emailing the builder to get their lender's contact info so that way you can still register with your agent.  I have always advised my new home buyers to get pre-qualified with the builder's lender if they are serious about buying in a particular community.  So if you want to get a particular lot, get pre-qualified with the builder's lender ASAP to get on the list.  You can go with an agent to register with you anytime (but has to be on your FIRST PHYSICAL VISIT to the sales office/models.
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Offline dpmj1968

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Re: Rebate on New home purchases - Discuss
« Reply #212 on: October 21, 2017, 03:25:53 AM »
Can anyone send me a link or something I can send to my CPA regarding this? He believes the only way is 1099. Also had a friend go through something with IRS saying it has to be 1099 as well.

Besides the IRS ruling with Redfin, you just need to step back for a second and apply some common sense when it comes to the "earned income" definition.  The IRS defines it as earnings from you working for someone or some company who pays you providing goods and/or a services OR earnings from you owning and running a business or farm (investments, rentals, etc would fall into this group).  Where has the buyer done work for the agent to constitute earned income?  Obviously it's the other way around.  So the rebate is a reduction of the cost basis in the home (the same way it would be if the agent provided the rebate as a credit towards closing costs in escrow).  So I'd also for any agent or CPA to explain to me why a rebate done through escrow is treated a reduction of cost basis but a rebate outside of escrow should be treated as earned income?  See how that makes zero sense.  Just like you have uneducated and/or lazy agents, there are also CPAs that are no better.


My understanding is, if the rebate is done through escrow, (1) the actual amount seller paid to Buyers broker (factoring if Broker gave a rebate to Buyer) is what the Seller reports to the IRS and the rebate portion is treated as a reduction to purchase cost.  So I agree with what you posted on the process through escrow. 


Example, if the full commission that seller was paying to Buyers broker is $10,000, and Buyers broker told Seller and escrow to allocate $5,000 of his/her commission and treat this as a rebate and reduction to the purchase price.  The amount Seller would report on the 1099 issued to Buyers at $5,000 since that is the amount the seller actually paid to the Buyers broker and the other $5,000 would be treated as a Sellers reduction to purchase price.

Using the same example amounts listed above, IF full commission was issued to the Buyers broker outside escrow.  Then the Seller would issue the Buyers broker a 1099 for $10,000 since that is the amount the Seller actually paid the Buyers broker.  So unless the Buyers broker wants to pay taxes on the $10K, he/she will need to redirect the portion of this income towards the Buyer by issuing the Buyer a 1099 for $5K for the portion the Buyers broker gave to Buyer as a rebate outside escrow.  By doing this the Buyers broker will net their income earned from $10K to $5K (10K received from Seller less 5K given back to Buyer via 1099) and the Buyer will pay taxes on the $5K they received from the broker.  Hopefully this makes sense. 

Basically the issuing of 1099 from Buyers broker to Buyer is to benefit the Buyers broker and for them to pay taxes only on the actual amount they received vs. the full amount issued by Seller IF the process was done outside of escrow.

Also not all rebates are considered non taxable income.  Example, rebates issued from utility companies are considered taxable income.

Anyway, my 2 cents.

Offline qwerty

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Re: Rebate on New home purchases - Discuss
« Reply #213 on: October 21, 2017, 06:58:41 AM »
@dpmj - your two cents are wrong. All the buyers broker needs to do is deduct the 5k as an expense and there is no need to issue a a 1099 to the buyer. So the buyers broker only pays taxes on the remaining 5k of income. The buyer should not get a 1099 for a rebate of the Home purchase price. The funds from which the buyer is receiving a rebate are all the buyers to begin with which is why a rebate is treated as a reduction of the home purchase price vs income. 

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Offline dpmj1968

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Re: Rebate on New home purchases - Discuss
« Reply #214 on: October 21, 2017, 03:47:21 PM »
I stand corrected and you and the original poster are correct.  Rebates from Broker to Buyer are non taxable income.

https://www.inman.com/2011/05/06/tax-practices-real-estate-commissions-rebates/

http://timelineres.blogspot.com/2011/04/while-rebates-from-real-estate-agents.html

Thank you.

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Offline test

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Re: Rebate on New home purchases - Discuss
« Reply #215 on: October 21, 2017, 05:16:37 PM »
@dpmj - your two cents are wrong. All the buyers broker needs to do is deduct the 5k as an expense and there is no need to issue a a 1099 to the buyer. So the buyers broker only pays taxes on the remaining 5k of income. The buyer should not get a 1099 for a rebate of the Home purchase price. The funds from which the buyer is receiving a rebate are all the buyers to begin with which is why a rebate is treated as a reduction of the home purchase price vs income. 

That may be true but your chances of getting audited go way up with all those deductions.

Offline USCTrojanCPA

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Re: Rebate on New home purchases - Discuss
« Reply #216 on: October 21, 2017, 05:59:41 PM »
@dpmj - your two cents are wrong. All the buyers broker needs to do is deduct the 5k as an expense and there is no need to issue a a 1099 to the buyer. So the buyers broker only pays taxes on the remaining 5k of income. The buyer should not get a 1099 for a rebate of the Home purchase price. The funds from which the buyer is receiving a rebate are all the buyers to begin with which is why a rebate is treated as a reduction of the home purchase price vs income. 

That may be true but your chances of getting audited go way up with all those deductions.


That is correct, hence why I cut checks for my new home rebates.  Then I have both the cancelled check (in the memo section I write in the address) and the closing statement which both have the same name on it. 
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Offline USCTrojanCPA

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Re: Rebate on New home purchases - Discuss
« Reply #217 on: October 21, 2017, 06:02:40 PM »
Can anyone send me a link or something I can send to my CPA regarding this? He believes the only way is 1099. Also had a friend go through something with IRS saying it has to be 1099 as well.

Besides the IRS ruling with Redfin, you just need to step back for a second and apply some common sense when it comes to the "earned income" definition.  The IRS defines it as earnings from you working for someone or some company who pays you providing goods and/or a services OR earnings from you owning and running a business or farm (investments, rentals, etc would fall into this group).  Where has the buyer done work for the agent to constitute earned income?  Obviously it's the other way around.  So the rebate is a reduction of the cost basis in the home (the same way it would be if the agent provided the rebate as a credit towards closing costs in escrow).  So I'd also for any agent or CPA to explain to me why a rebate done through escrow is treated a reduction of cost basis but a rebate outside of escrow should be treated as earned income?  See how that makes zero sense.  Just like you have uneducated and/or lazy agents, there are also CPAs that are no better.


My understanding is, if the rebate is done through escrow, (1) the actual amount seller paid to Buyers broker (factoring if Broker gave a rebate to Buyer) is what the Seller reports to the IRS and the rebate portion is treated as a reduction to purchase cost.  So I agree with what you posted on the process through escrow. 


Example, if the full commission that seller was paying to Buyers broker is $10,000, and Buyers broker told Seller and escrow to allocate $5,000 of his/her commission and treat this as a rebate and reduction to the purchase price.  The amount Seller would report on the 1099 issued to Buyers at $5,000 since that is the amount the seller actually paid to the Buyers broker and the other $5,000 would be treated as a Sellers reduction to purchase price.

Using the same example amounts listed above, IF full commission was issued to the Buyers broker outside escrow.  Then the Seller would issue the Buyers broker a 1099 for $10,000 since that is the amount the Seller actually paid the Buyers broker.  So unless the Buyers broker wants to pay taxes on the $10K, he/she will need to redirect the portion of this income towards the Buyer by issuing the Buyer a 1099 for $5K for the portion the Buyers broker gave to Buyer as a rebate outside escrow.  By doing this the Buyers broker will net their income earned from $10K to $5K (10K received from Seller less 5K given back to Buyer via 1099) and the Buyer will pay taxes on the $5K they received from the broker.  Hopefully this makes sense. 

Basically the issuing of 1099 from Buyers broker to Buyer is to benefit the Buyers broker and for them to pay taxes only on the actual amount they received vs. the full amount issued by Seller IF the process was done outside of escrow.

Also not all rebates are considered non taxable income.  Example, rebates issued from utility companies are considered taxable income.

Anyway, my 2 cents.

To be very precise here's how I do it on my Schedule C...

Line 1 (Gross Receipts/Sales) - I input the 1099 that I receive from my broker (commission rebates made through escrow are reflected in that number)
Line 2 (Returns & Allowances) - I input the total commission rebates made outside of escrow which is a deduction to Line 1

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Offline HMart

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Re: Rebate on New home purchases - Discuss
« Reply #218 on: October 22, 2017, 11:48:10 AM »
You don't file an 1120-S?

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Offline USCTrojanCPA

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Re: Rebate on New home purchases - Discuss
« Reply #219 on: October 22, 2017, 12:23:17 PM »
You don't file an 1120-S?

No, because I don't own my own brokerage or have agents working for me so there's no real need for me to have an S-corp or LLC for my realtor business.  I'm a sole proprietor on my Schedule C.
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Offline Zion

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Re: Rebate on New home purchases - Discuss
« Reply #220 on: October 24, 2017, 01:59:22 PM »
any idea how much redfin gives the rebate for the newly built homes? if the rebate is $15000, do they give $7500 to the buyer?
they cut down a lot recently on resale homes rebates.

Offline USCTrojanCPA

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Re: Rebate on New home purchases - Discuss
« Reply #221 on: October 24, 2017, 06:01:56 PM »
any idea how much redfin gives the rebate for the newly built homes? if the rebate is $15000, do they give $7500 to the buyer?
they cut down a lot recently on resale homes rebates.

Redfin doesn't do 50% rebates anymore....it's the same rebate as for a resale homes and new homes, somewhere between 25-33% as long as they get their minimum of like $6k or so.
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Offline Agent Joe

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Re: Rebate on New home purchases - Discuss
« Reply #222 on: June 20, 2018, 10:42:29 PM »
Hello fellow Irvine residents (and future residents)! I am a licensed realtor in Irvine and would love the opportunity to work with anyone looking to purchase a new home in the area. My contact info is below. :)
Joseph Du
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Specialized in new homes and residential real estate investing.

Offline Compressed-Village

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Re: Rebate on New home purchases - Discuss
« Reply #223 on: June 20, 2018, 11:09:46 PM »
.
« Last Edit: June 21, 2018, 05:03:32 AM by Compressed-Village »

Offline msuum

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Re: Rebate on New home purchases - Discuss
« Reply #224 on: June 21, 2018, 07:22:46 PM »
Does anyone know how much I have to pay for the listing agent in today's market.  I am thinking to sell my rental home and cash in right now.

 

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