What Is a Kickback? Definition, How It Works, Example

What Is a Kickback?

By Kristi Waterworth – Updated Nov 21, 2024 at 10:25 AM

Key Points

Kickbacks are illegal payments for preferential treatment, affecting financial decision integrity.
Financial customers may face limited investment options if advisors favor entities offering kickbacks.
Effective kickback control requires thorough checks within organizations to ensure proper money handling.

Sometimes, people who work in the business world don't always have their clients' best interests in mind. You might hear about them on the news or through word of mouth, taking advantage of their positions. If you're wondering, "What is a kickback?" we've got some answers for you.

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Contracting with friends or family of someone with the power to make those decisions within an organization is always a very suspect situation, one that can be prime for kickbacks. However, there are many other situations in which someone behaves badly on one end or the other of a transaction.

If a kickback is detected, it may result in professional ethics violations, criminal prosecution, and even tax penalties since kickbacks are technically taxable income that is rarely reported.

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About the Author

Kristi Waterworth has been a contributing real estate and financial expert at The Motley Fool, covering real estate, investing, and personal finance topics, since 2020. Kristi has been interviewed by various TV media outlets and podcasts for her real estate investing expertise – from residential real estate to digital real estate and everything in between. Kristi’s journalist career spans over 25 years, and she has written about real estate investing, homeownership, and home construction specifically for the last decade. She was also previously a licensed Realtor and general building contractor before the Great Recession and housing market collapse. She holds a bachelor’s degree in American history from Columbia College in Missouri.

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