Real Estate

Realtor Cash-back – Tax implications clarified

  • Last Updated:
  • Jan 17th, 2020 12:35 pm
[OP]
Deal Addict
Nov 22, 2004
1410 posts
405 upvotes

Realtor Cash-back – Tax implications clarified

Hey all,

The question of tax implications has come up several times when it came to cash-back rebates from realtors. So, I called CRA today to specifically ask this and need to provide this update for clarity to all:

For the realtor:
  • Commission rebate is considered a deductible business expense (so long as it was used to earn business, and only applies to people at arm's length - i.e. not family members)

For the clients:
  • If the property is income producing (commercial/rental), then the amount of rebate is subtracted from the cost of the property to create a new adjusted cost base. The onus effectively falls onto the property owner to report this in their taxes.
  • If the property is a principal residence, there are NO TAX IMPLICATIONS, i.e. the amount is not taxable and no T4A needs to be issued.

This comes from a 2012 ruling I was referred to: Business Expense for Real Estate Agent.

Sincere apologies to all for the confusion surrounding this in previous threads. Hope this clarifies for all future transactions.

Cheers
Last edited by Clueless Fox on Nov 21st, 2017 2:53 pm, edited 1 time in total.
Heatware: 9-0-0
Realtor @ Royal LePage United Realty
11 replies
Member
Sep 22, 2014
342 posts
133 upvotes
Ottawa, ON
Would cashback mortgages fall under this category if it was an income producing property?
Deal Addict
Feb 5, 2009
2809 posts
925 upvotes
Newmarket
gerogesin wrote:
Nov 22nd, 2017 5:42 am
Would cashback mortgages fall under this category if it was an income producing property?
Yes, except it would affect profit and loss for the year, and not a cost base which was the point of the post by Clueless Fox as it relates to the commissions paid to RE broker on purchase.
Banned
May 31, 2005
298 posts
728 upvotes
Clueless Fox wrote:
Nov 21st, 2017 2:53 pm

For the realtor:
  • Commission rebate is considered a deductible business expense (so long as it was used to earn business, and only applies to people at arm's length - i.e. not family members)
Thanks for the useful info! So would that mean as a realtor, if I earn $20,000 commission and give $5,000 of it back to the client, then I would only claim an income of $15,000? Or would I report the $20,000 as income and then report $5,000 as a tax-deductible expense? Would either way result in the same thing?
Deal Addict
Feb 22, 2007
1884 posts
172 upvotes
Mississauga
dimsumboi wrote:
Nov 2nd, 2018 3:01 pm
Thanks for the useful info! So would that mean as a realtor, if I earn $20,000 commission and give $5,000 of it back to the client, then I would only claim an income of $15,000? Or would I report the $20,000 as income and then report $5,000 as a tax-deductible expense? Would either way result in the same thing?

Your commission statement from you brokerage would pay you out $20,000 which is what you report as your gross commissions.

Then you would deduct $5k as an expense.

MAKE SURE you pay the rebate by cheque, to the home owners name, and that it can be linked the property that was bought or sold
Deal Addict
Mar 27, 2004
3451 posts
902 upvotes
Toronto
you would have your brokerage issue the cheque to avoid any issues with taxes. this would also lower the brokerage fee as well. Not sure how your brokerage handles rebates. But if I was giving 5k back. i am only getting brokerage fees taken from the 15k and not the 20k.
Full-time Realtor
Award Winning Realtor.
Jr. Member
Oct 27, 2018
113 posts
46 upvotes
Clueless Fox wrote:
Nov 21st, 2017 2:53 pm
For the clients:
  • If the property is income producing (commercial/rental), then the amount of rebate is subtracted from the cost of the property to create a new adjusted cost base. The onus effectively falls onto the property owner to report this in their taxes.
For the case of income producing property, I think there is an election that you need to file to reduce the cost of the property to create a new adjusted cost base. If the election is not filed, the CRA will include the cash incentive into income.
Jr. Member
Feb 13, 2017
143 posts
59 upvotes
Just want to get some background on the matter of rebates provided by the real estate agent. $5000 seems like a steep rebate. Is it normal in this industry to offer rebates in such large amounts? I personally received a closing gift worth a few hundred a couple of years ago, but never imagined such a large amount of rebate. Any input would be appreciated.
Sr. Member
Feb 19, 2019
502 posts
456 upvotes
Stouffville ON
Arias1619 wrote:
Oct 17th, 2019 9:59 am
Just want to get some background on the matter of rebates provided by the real estate agent. $5000 seems like a steep rebate. Is it normal in this industry to offer rebates in such large amounts? I personally received a closing gift worth a few hundred a couple of years ago, but never imagined such a large amount of rebate. Any input would be appreciated.
It's not an industry standard but some realtors such us myself offer significant rebates, often the rebate is a percentage of commission received and can even exceed $5K, the dollar amount will depend on the agreement between the buyer and agent, purchase price of the house, is the rebate percentage or set amount etc. The rebates should be in the contract to avoid misunderstandings.
Full Time and Full Service Realtor
Jr. Member
Feb 13, 2017
143 posts
59 upvotes
Thank you, this is helpful.
senasena wrote:
Oct 17th, 2019 10:09 am
It's not an industry standard but some realtors such us myself offer significant rebates, often the rebate is a percentage of commission received and can even exceed $5K, the dollar amount will depend on the agreement between the buyer and agent, purchase price of the house, is the rebate percentage or set amount etc. The rebates should be in the contract to avoid misunderstandings.
Newbie
Apr 26, 2012
3 posts
1 upvote
NORTH YORK
Hey all, looking for an agent in Toronto with cash back for the following services:

1. I'll find the properties I want to bid on - no research/showings required from you
2. Once a property is identified, work with me to do the offer --> closing, including helping me establish the est market value and bidding strategy

Toronto house, east end (Leslieville/beaches): $2-2.5M.

Please DM me if interested - potential to work together on sale of my existing house as well

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