All Forum Posts by: Clayton Cox

Would I just expense the 18k under “other expenses” and explain it in the other expenses section?

I can’t really find any material online about this. From what I have come across, what you said is true if I were to gift my commission to a client when he purchased a home so logically what you are saying should also be true. 
Sow when my brokerage issues a 1099 to me at the end of the year for let’s say 60k, it won’t raise any flags for me to only report 42k on my schedule C? 

I’m an engineer (full time, W2) and a real estate agent on the side (Schedule C).  I have 20 rental properties (Schedule E) that currently carry a passive loss of 300k. I am purchasing another rental property and will have about 18k in realtor commission coming in on that. I would like to not pay taxes on the commission but ideally would still like to utilize it. This property will need to be furnished so I see a couple options but would like to see if anyone has any better recommendations. Due to my current tax situation, I don’t have much benefit of adding another 18k in income to my schedule C while adding an extra 18k in losses to my schedule E which is how it would shake out if I just take the commission and then pay for the furnishings unless I’m missing something on this topic  

1. Just ask the seller to take the commission off of the sales price. This will avoid me paying taxes on the commission but it won’t allow me to take advantage of the 18k today and instead will mainly see the benefit when I sell the property. At 7%+ interest rates this isn’t a terrible idea but I’m still actively beating 7% on my investments so I would ideally pursue a more aggressive strategy 

2. Pay a home decorator through the title company to furnish the rental. This would also avoid me paying taxes but has a couple downfalls. A) I would spend more money furnishing the property which will eat into the tax savings. B) most home decorators I’ve come across do not want to pay for all of your items out of their own pocket while waiting for the property to close. I imagine I’ll spend around 20k on furnishings so that is a decent dent in their pocket. 

In an ideal world I could just send the money to Wayfair directly from the title company or I would just be able to accept the commission and somehow not have the irs consider it to be schedule C income. Would love to hear any recommendations.