The beginning stages

3 Replies

Hey BP community,

I'm just starting out on this REI journey and I had a few questions. I'm meeting with my CPA today to go over some things. One of the questions I have is, In California, when we close on a deal whether it's a fix and flip or wholesale flip, what percentage is safe to hold our for taxes?

What are some other important questions I need to ask him before moving forward? 

Thanks so much. 

@Kristin Lupo

Also even if you have to do that. Starting out, you might be at a point where you just need to cover your previous years liabilities and not need to do filings. Talk about doing business in CA as well. $800 plus a year just for the pleasure of being here along with if you are subject to quarterly tax payments or SE tax. Just starting out you might not have to worry about most of that but if you are starting out by flipping locally, you'll break some of those tax milestones before you know it.

Originally posted by @Todd Rasmussen :

@Kristin Lupo

Also even if you have to do that. Starting out, you might be at a point where you just need to cover your previous years liabilities and not need to do filings. Talk about doing business in CA as well. $800 plus a year just for the pleasure of being here along with if you are subject to quarterly tax payments or SE tax. Just starting out you might not have to worry about most of that but if you are starting out by flipping locally, you'll break some of those tax milestones before you know it.

Normally, CA will require the $800 if you are doing business under an entity that has limited liability protection. If you do business in your own name, you won't be subject to $800.
Kristin didn't mention anything about having an entity.

 

@Kristin Lupo

Welcome to biggerpockets.

You should talk to your accountant and ask him what your marginal tax rate is.
You may also be subject to self-employment taxes from the flips/wholesales. If you are at or near the social security base, the self-employment tax exposure may not be that high.