Hi Everyone, hope you can guide me.
I am purchasing my first flip under my LLC in a few days, my wife is the buyer agent and she wants to help me with the closing cost, can she apply her commission towards the closing costs? or does she gets her commission and then helps me with the renovation costs? which makes more sense from a taxable income perspective?
Thanks in advance.
She can do what ever she wants with her commission. Probably take it at time of settlement so she doesn't have to pay taxes on it.
Thanks Maricela, did some research and it seems that taking it at the time of settlement its the best approach.
Hi @Jose R. ,
Can't speak for NC but when I deal with the same issue I take the commissions at closing and then push the money over later.
A point to consider. Since I am the buyers agent I can't have any money in the deal. So I normally sent her chunks of money every month for things completely unrelated to the deal at hand (Paying bills, groceries etc). Since I was not on the mortgage the bank wanted to know where the money came from. Normally not a huge issue, until they note that you are the buyers agent. Now you are not doing an arms length transaction any longer because you are "putting your own money in the deal.... as an agent". (even though you sent her $200 for groceries and $200 for a phone bill and sent her $650 for the yearly car insurance last month and...). The first time we had to wait 2 months for the money to season and I couldn't send any more (hello paying my own bills instead of having my financial rock star of a wife do it......)
We have since worked around that using entities and other methods of dealing with issues like groceries and car insurance payments. But just something to keep in mind.
Taking it at the time of settlement is the best tax wise but keep in her broker(if there is one), the lender and the seller all have to sign off on that.
@Jose R. I always apply my commission to the closing costs or have the seller reduce their price by the amount they would be paying me.
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