Is realtor rebate on home purchase taxable?

Forum|Forum|2 years ago
February 17, 2024
1 reply
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My realtor issued a check as a rebate on home purchase and he issued a 1099-NEC for it. Is the realtor rebate issued in the form of a check after closing is taxable?

Best answer by Vanessa A

No, the realtor rebate is not taxable income. Because he issued you a 1099-NEC, you will need to still enter it on your return. However, you will then need to make an adjustment to back the income out of your taxable income.

To do this you will take the following steps:

Federal
Income
Start next to 1099-NEC under Other Common Income
Enter the 1099-NEC
When you get to Does one of these uncommon situations apply, select this is not money earned as an employee and select continue

To remove the income so it is not double reported, you will go to

Income
Miscellaneous Income
Other Income not already reported on Form w-2 or Form 1099
Select yes to Other Wages Received
Hit continue 3 times without entering anything
Say Yes to did you earn any other wages
Select Other then Continue
Enter the amount reported on 1099-NEC instead as a negative number with a description that is is backing out the nontaxable realtor rebate

Vanessa AAnswer

To do this you will take the following steps:

Federal
Income
Start next to 1099-NEC under Other Common Income
Enter the 1099-NEC
When you get to Does one of these uncommon situations apply, select this is not money earned as an employee and select continue

To remove the income so it is not double reported, you will go to

Income
Miscellaneous Income
Other Income not already reported on Form w-2 or Form 1099
Select yes to Other Wages Received
Hit continue 3 times without entering anything
Say Yes to did you earn any other wages
Select Other then Continue
Enter the amount reported on 1099-NEC instead as a negative number with a description that is is backing out the nontaxable realtor rebate

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naveenkumarpannemAuthor

@Vanessa A - Thank you for your reply.
If I sell the home in future, in the below scenario

Home Price -> X
Realtor rebate -> Y

Net Price of the Home -> X - Y = Z

Home sale price -> A

Capital Gains -> A - Z = B

When do I need to show amount B as capital gains? I mean if I sell the home before N number of years, what is N?

Vanessa A

If you owned and lived in the home for 2 out of the last 5 years, then you may qualify for the home sale exclusion which would exclude up to $250k ($500k if married filing jointly) of the sale of your home. In order to qualify you must not have used the home sale exclusion in the past 2 years.

If you would sell before the 2 years and do not have any exceptions to the home sale rule, the rest of your income will play a part in the tax rate, but the home sale profit may be subject to capital gains of a rate between 0% and 20%. The capital gains rates are as follows based on income. The brackets will change each year.

Zero percent rate for the following income
- $44,625 for single or MFS
- $59,750 for HOH
- $89,250 for Married Filing Jointly
Fifteen percent for income more than above but less than below
- $276,900 for MFS
- $492,300 for Single
- $523,050 for Head of Household
- $553,850 for Married Filing Jointly
Twenty percent for the amount that your taxable income is over the 15% level.