Realtor to use commission earned towards closing costs on purchase of own home

[Terry L Williams]

Real Estate Agent uses commission earned on the subject property toward their own down payment when they are also the buyer of that same property (personal residence). The Realtor receives a 1099 with the commissions included from sale, can they deduct the closing cost amount paid to reduce or essentially wash out the commissions since they never actually received the money?

[Jeff Pasmore]

Terry,

Yeah, you can use your commission toward your closing costs when buying your own home, but tax-wise, it’s not a clean wash. Here’s why:

Even though you’re applying your commission toward closing, you’re still earning it, which means the brokerage is going to 1099 you for the full amount. The IRS sees that as taxable income, even if you never physically touched the money.

Now, the good news is you might be able to offset it as a business expense. Some agents classify it as a ‘commission rebate’ or ‘buyer credit’ and deduct it accordingly, but you’ll want a CPA to confirm how to structure it properly. Arizona allows commission credits toward closing, so that part’s fine it’s just about handling the tax side correctly.

Bottom line: You’re still getting taxed on it, but with the right accounting strategy, you can minimize the hit. Talk to your CPA and make sure it’s categorized right

I hope this helps !