Question: Quarterly taxes on LLC member income

4 Replies

Let's say I am the only member of an LLC and the business makes 20k through wholesaling in a given quarter. If my marketing expenses were 3k, I suppose I would be expected to pay personal taxes on the remaining 17k. But what if that 17k is immediately fed back into the business, for instance as a portion of a down payment on a buy and hold? Do I owe zero taxes for this quarter?

You should consult a tax professional. Funds used as equity (ie: down payment) on another property is not considered an expense. Things like closing costs to your LLC would be an expense. So you would still owe taxes on a portion of the 17k. You can do 1031 exchanges as a way to defer taxes, but it's designed more for a buy and hold strategy than a flipping houses strategy.

That makes sense, since a contribution to equity isn't really a cost. I know to contact tax professionals, but I'm just trying to get a general understanding of how this stuff works. What if that 17k were used toward renovation costs on a flip? Would this still be considered a contribution toward equity?

I believe most major renovation cost would be considered capital improvements and would fall under a depreciation schedule.
In other words, no you wouldn't be able to use them to offset your tax liability.

Good to know. Thanks, all. I'd tag you but I'm on a tablet and this site isn't tablet friendly.