Realtor Cash-back – Tax implications clarified
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.