I am a newbie, I have not done any deals yet, and I know I will be getting a CPA/bookkeeper; my question is: in general terms how much should I expect to pay in taxes? For instance, if I buy a house with an ARV of 150k for 75k, and wholesale it for 85k, how much should I expect the tax bill to be; will the tax be based on whole of the 85k, or the 10k profit? If on the 85k, will I have anything after tax for profit? If only on the 10k, I suspect about 50% left.
You only pay tax on the profit.
Thank you Ned
Another related question: is there a legal reason for a CPA as opposed to an LPA? My Grandpa was an LPA and could do anything (accounting and bookkeeping wise) a CPA could do, so to use an LPA would be les expensive, so what is the worth of the CPA?
I have no idea what an LPA is but you do not need a CPA. When I switched to my CPA, I told him one reason I was switching is my old accountant was not a CPA. He said "it doesn't matter. What matters is does he or she do a good job."
Michael - I'm a big fan of learning how to do this yourself. At some point if you have a dozen flips and multiple rentals, you can go pro as you might value your own time more.
But, I believe as a new investor, ask questions, and learn to do it yourself.
By the way, a $10K profit should net you more than half after taxes. Of course, it depends on your Federal and State marginal tax rates, but 30% total is more like it.
Ned, an LPA is a licensed public accountant, my Grandfather said that he could have been a CPA, but he didn't see the need to take the test and pay the fee to do what he was already doing. So in your opinion, the certification brings no legal asset to my asset protection?
Frank, thank you for the advice and encouragement, I agree that I will need experience to more fully know what I am doing and the expected results, and that asking questions (and heeding the answers) will reduce bad experiences.
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