Realtor commission (2.5%) : Closing or cash to save tax (agent, expensive, broker)

[firsthomebuilder]

Guys,

Need some expert advise from you. My realtor is going to pay almost all her commision (2.5% of the house cost) to me. If I understand correctly there will be heavy tax imposed on it as it would be considered as my unearned income. My questions is simple what should I take as an option to save on tax or does it not matter which way I go :

1) Have realtor give me a check/ cash from her commission. [Will tax be imposed on it? Will it be considered as my unearned income?]

2) Have realtor contribute this money towards closing cost expenses? [Will tax be imposed on it? Will it be considered as my unearned income? Will it save tax over option 1?]

Thanks all for all your support! You guys have been great!

[firsthomebuilder]

any response guys?

[Texas Ag 93]

If you haven't already done so, I would consider moving this to the "Real Estate" forum, or even possibly one of its sub forums. You might get more/better answers there, even if they are not State specific.

[firsthomebuilder]

Originally Posted by Texas Ag 93

If you haven't already done so, I would consider moving this to the "Real Estate" forum, or even possibly one of its sub forums. You might get more/better answers there, even if they are not State specific.

Thanks much for your response. I am new to the forum. Can you please tell me how to move this to a new forum? Or if you could please do it for me.

[huma281]

I'm no realtor, but from my understanding. If the realtor cuts you a check, they'll have to pay tax on the full commission. If they contribute it towards your closing cost, they only pay tax on the amount they keep.

[Texas Ag 93]

Originally Posted by firsthomebuilder

Thanks much for your response. I am new to the forum. Can you please tell me how to move this to a new forum? Or if you could please do it for me.

Sorry, I don't know how to do that. But, just try and cut and paste this (or just start a new thread) under the General Forms/Real Estate section. You could even post it under the "Real Estate Professionals" sub forum.

I bet that garners a lot more responses.

[dendrotriton]

Just have her agree to only take .5% or something. You don't pay taxes on the extra money you saved by not paying realtor as much. Thats like saying Im going to pay taxes on money I saved by choosing the cheap contractor vs the expensive one. Or the cheap landscaper vs the expensive one.

[predatorprey]

The only way for taxes to be avoided by all parties is for the agent signing a document (typically provided by the builder) stating that a certain amount be credited to buyer closing costs on the HUD statement.

Everything must occur within the HUD statement or taxes with occur.

This is how my brokerage and my previous brokerage has always done it.

[BoBromhal]

To my knowledge, a contribution to your closing costs would be a non-taxed event. But consult a CPA/tax advisor, not anyone else.

I do wonder why your Realtor would provide (almost) all of their compensation, unless they're a family member. You also have to have the explicit OK of your lender, and the total paid on your behalf may not exceed certain thresholds your lender sets.

[cully]

I guess you mean you are the buyer, right?