Author Topic: First attempt selling real estate - now what about taxes?  (Read 799 times)

ChpBstrd

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First attempt selling real estate - now what about taxes?
« on: April 20, 2018, 02:44:12 PM »
My in-laws tried to sell their ratty rental condo through realtors for about a year and a half. When the last realtor's contract ran out, I said "I've always been curious about selling real estate. If you give me a crack at it I'll only charge you 2%." I mostly wanted to see if I liked selling RE. Four months and a few repairs later it's under contract.

Now my in-laws want me to invoice them for my commission so they can include it in the closing process and deduct the expense from their cost basis. That's easy, but it means I had better report that income correctly for tax purposes!

What kind of documentation do I need aside from a copy of the invoice?

I'm not incorporated, just an individual getting paid for work. As I recall, tax forms just have an "other income" line where you enter an amount (I'm in the US). Is that all there is to it?

wbranch

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Re: First attempt selling real estate - now what about taxes?
« Reply #1 on: April 20, 2018, 05:06:09 PM »
I don't think you can sell real estate for other people without a license in most/all states. How is the title company handling the distribution of funds? Better check the real estate laws in your state.

In most cases this should be reported on Sch C as self employment income.

LessIsLess

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Re: First attempt selling real estate - now what about taxes?
« Reply #2 on: April 24, 2018, 09:13:12 AM »
My in-laws tried to sell their ratty rental condo through realtors for about a year and a half. When the last realtor's contract ran out, I said "I've always been curious about selling real estate. If you give me a crack at it I'll only charge you 2%." I mostly wanted to see if I liked selling RE. Four months and a few repairs later it's under contract.

Now my in-laws want me to invoice them for my commission so they can include it in the closing process and deduct the expense from their cost basis. That's easy, but it means I had better report that income correctly for tax purposes!

What kind of documentation do I need aside from a copy of the invoice?

I'm not incorporated, just an individual getting paid for work. As I recall, tax forms just have an "other income" line where you enter an amount (I'm in the US). Is that all there is to it?

They already gave you a spouse (their kid).  I would take no payment in this transaction.  Besides, you got a great learning experience out the deal.  Believe me, taking no compensation will mean more in the long term than the 2%.

wbranch

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Re: First attempt selling real estate - now what about taxes?
« Reply #3 on: April 24, 2018, 10:36:38 AM »
My in-laws tried to sell their ratty rental condo through realtors for about a year and a half. When the last realtor's contract ran out, I said "I've always been curious about selling real estate. If you give me a crack at it I'll only charge you 2%." I mostly wanted to see if I liked selling RE. Four months and a few repairs later it's under contract.

Now my in-laws want me to invoice them for my commission so they can include it in the closing process and deduct the expense from their cost basis. That's easy, but it means I had better report that income correctly for tax purposes!

What kind of documentation do I need aside from a copy of the invoice?

I'm not incorporated, just an individual getting paid for work. As I recall, tax forms just have an "other income" line where you enter an amount (I'm in the US). Is that all there is to it?

They already gave you a spouse (their kid).  I would take no payment in this transaction.  Besides, you got a great learning experience out the deal.  Believe me, taking no compensation will mean more in the long term than the 2%.

Gave him a spouse? Someone with the user name ChpBstrd probably did not give much of a dowry.

When my wife and I got engaged my MIL actually said that I did not ask permission, I laughed and said that I would not be asking. We will get along just fine.

ChpBstrd

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Re: First attempt selling real estate - now what about taxes?
« Reply #4 on: April 24, 2018, 11:56:57 AM »
Quote
Gave him a spouse? Someone with the user name ChpBstrd probably did not give much of a dowry.

Ha! You are correct and you also win the internet today.

In all fairness, I invested dozens of hours in repairs, cleaning, photography, marketing, holding open houses, and on the phone with bullshitters.

REIgal

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Re: First attempt selling real estate - now what about taxes?
« Reply #5 on: April 26, 2018, 05:09:05 PM »
I don't think you can sell real estate for other people without a license in most/all states. How is the title company handling the distribution of funds? Better check the real estate laws in your state.

In most cases this should be reported on Sch C as self employment income.

This is correct.  In most states you can't practice real estate without a license.  I wouldn't submit an invoice to title.  If they're going to pay you they should find an alternative means.

tralfamadorian

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Re: First attempt selling real estate - now what about taxes?
« Reply #6 on: April 26, 2018, 06:38:02 PM »
I don't think you can sell real estate for other people without a license in most/all states. How is the title company handling the distribution of funds? Better check the real estate laws in your state.

In most cases this should be reported on Sch C as self employment income.

This is correct.  In most states you can't practice real estate without a license.  I wouldn't submit an invoice to title.  If they're going to pay you they should find an alternative means.

+1

The only time I've seen someone in your position paid for their time, it was called a finder's fee. I have no idea of that made it on the closing paperwork but I suspect not.

ChpBstrd

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Re: First attempt selling real estate - now what about taxes?
« Reply #7 on: April 27, 2018, 10:58:43 AM »
I put "property management" on the invoice, which does describe the cleaning and repair work. The only contract between me and my in-laws was verbal.

I figure I saved my inlaws $500-750 in plumbing and $6k in commissions, so I don't feel at all bad about charging them $2k for what I did.

I might need to look into paying local sales tax in addition to including this in my income taxes.