Tax question on positive cash flow

2 Replies

Hi BP,

I have a tax question about positive cash flow money on multi family houses. If I'm making a positive cash from a multi family house and if I continue to keep that money in a business account and don't clam it as personal income is that money subject to tax?

Thanks

Matt

Matthew,

As always talk to your accountant but the basics are not if it is in a 'business account' but who owns the property and if there is net 'taxable income'.

From a tax perspective, the positive cash flow (I assume you mean after expenses) is one part of determining any taxes owed. Another significant part is depreciation, past losses and there are other components (again talk to your accountant). When everything is added up, that determines the 'taxable income'.

If there is a 'taxable income', taxes are owed at the marginal rates of what ever entity owns the property. If it is a company (not LLC), there is one set of rates, if it is you personally, there are different set of rates.

Hope this helps,

Oren

It depends on how you've structured this.

If you own the properties in your personal name, then there's no such thing as "claiming it as personal income."  It is income regardless of which account you keep the funds in.

The same holds true if you are holding the properties in a pass through entity such as an LLC or an S-Corp - as well as many trust structures.

The only time you would not declare this as personal income is if you are holding the properties in a C-Corp or a trust structure specifically structured for this.