Real Estate

Cashback = land transfer tax

  • Last Updated:
  • Sep 5th, 2020 7:42 pm
Newbie
User avatar
Apr 11, 2019
27 posts
14 upvotes

Cashback = land transfer tax

As a real estate agent, instead of offering clients (buyers) cachback, can I pay land transfer tax for them and deduct it as expense later?
18 replies
Deal Expert
Feb 22, 2011
16521 posts
21872 upvotes
Toronto
If you do cashback up front wouldn't that essentially be a 100% deduction since you never received the income? Why would you want to take the income and then pay an expense to get a partial credit of like 30%?
Deal Addict
Nov 13, 2013
4527 posts
3689 upvotes
Ottawa
sircheersa wrote: If you do cashback up front wouldn't that essentially be a 100% deduction since you never received the income? Why would you want to take the income and then pay an expense to get a partial credit of like 30%?
It's the same either way. It's 100% deductible. Pay tax based on net income. (Well I'm not an accountant so don't know if land transfer tax is some exception)
Deal Addict
Jul 3, 2007
4153 posts
4626 upvotes
Toronto
gospodar wrote: As a real estate agent, instead of offering clients (buyers) cachback, can I pay land transfer tax for them and deduct it as expense later?
why bother, just give them cash back
Newbie
User avatar
Apr 11, 2019
27 posts
14 upvotes
joepipe wrote: why bother, just give them cash back
difference is money "before" and "after" tax

cashback is paid from "after" tax money
Member
Dec 12, 2011
203 posts
225 upvotes
Toronto
How is that an expense? It is a gift on your part.
Deal Addict
Feb 19, 2019
2347 posts
4020 upvotes
Stouffville ON
gospodar wrote: difference is money "before" and "after" tax

cashback is paid from "after" tax money
No it's not, cash back is a deductible expense, so are other legit expenses such as paying for staging, paying for inspectors, reimbursing other amounts etc.
The profit is the same, so is the tax liability.
Full Time and Full Service Realtor
Deal Addict
May 9, 2017
1261 posts
1393 upvotes
OMG, please tell me you are not actually a real estate agent.
Deal Fanatic
User avatar
Sep 14, 2006
9644 posts
2634 upvotes
NotRobot wrote: OMG, please tell me you are not actually a real estate agent.
RE agents don’t need to know the tax laws. That’s why there’s RFD.
TEAM CANADA!!!!!!!!!!!
Newbie
User avatar
Apr 11, 2019
27 posts
14 upvotes
senasena wrote: No it's not, cash back is a deductible expense, so are other legit expenses such as paying for staging, paying for inspectors, reimbursing other amounts etc.
The profit is the same, so is the tax liability.
how do you get an invoice/receipt for cashback?
Newbie
User avatar
Apr 11, 2019
27 posts
14 upvotes
NotRobot wrote: OMG, please tell me you are not actually a real estate agent.
calm down, I'm not stealing your clients :)
Deal Expert
User avatar
Feb 11, 2009
20055 posts
9837 upvotes
Toronto
OP - I highly suggest you speak to your accountant on this. Based on the questions you're asking, you're going to get yourself into trouble, and I say this as both a RE agent and an Accountant myself - there are records you need to keep in case the CRA comes knocking at your door. Do not just hand your clients cash, and paying for things like Land Transfer tax can just get messy.

I also don't understand why you brought up before tax/after tax. There is no HST on Land Transfer tax....
Realtor (Investment Properties) - CPA, CA
Penalty Box
Mar 27, 2004
10493 posts
9009 upvotes
Toronto
inexperienced agent
Full-time Realtor
Member
Jun 6, 2014
317 posts
145 upvotes
Toronto, ON
I'm assuming you're in Ontario. Standard commission is 2.5%. And Land Transfer Tax is up to 2% for Ontario and up to 4% in Toronto. If the buyers end up with a house in Toronto, do you end up paying them?
Newbie
User avatar
Apr 11, 2019
27 posts
14 upvotes
deal_with_singh wrote: OP - I highly suggest you speak to your accountant on this. Based on the questions you're asking, you're going to get yourself into trouble, and I say this as both a RE agent and an Accountant myself - there are records you need to keep in case the CRA comes knocking at your door. Do not just hand your clients cash, and paying for things like Land Transfer tax can just get messy.

I also don't understand why you brought up before tax/after tax. There is no HST on Land Transfer tax....
thx, that's exactly what I'll do.
Deal Fanatic
Jul 3, 2011
6517 posts
3798 upvotes
Thornhill
gospodar wrote: As a real estate agent, instead of offering clients (buyers) cachback, can I pay land transfer tax for them and deduct it as expense later?
You can expense any legitimate expense but I'm curious...

What is the purchase price amount that would be so low that it prompts you to want to pay the land transfer tax which is a percentage of the purchase price rather than a rebate which is a percentage of the percentage of the purchase price?
Newbie
User avatar
Apr 11, 2019
27 posts
14 upvotes
licenced wrote: You can expense any legitimate expense but I'm curious...

What is the purchase price amount that would be so low that it prompts you to want to pay the land transfer tax which is a percentage of the purchase price rather than a rebate which is a percentage of the percentage of the purchase price?
My initial question was more theoretical.

But, to answer your question - a first time buyer of a 600000 house in Burlington pays ~$4475.
Deal Fanatic
Jul 3, 2011
6517 posts
3798 upvotes
Thornhill
gospodar wrote: My initial question was more theoretical.

But, to answer your question - a first time buyer of a 600000 house in Burlington pays ~$4475.
And now that everyone has the reasoning behind the question, they can answer again.

Top

Thread Information

There is currently 1 user viewing this thread. (0 members and 1 guest)