Am I calculating this correctly? TAXES
I have an appointment to meet with a CPA on Monday, and am researching everything now to test his knowledge in real estate planning. (any specific questions to ask would be helpful)
I looked at all of the different taxes flippers are charged and broke it down if I were to make $100,000 in annual profits.
$100,000 net profit
(15,300) self employment taxes (social security/medicare)
(6,750) state/county tax (ohio)
(1,855) 10% of first $18,550 (filing joint married)
(8,512) 15% of 56,750
(6,750) 25% of 24,700 (bringing us to 100,000)
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$61,407 take home or 38.6% taxation (absent deductions)
Am I missing anything? How is this possible, how can we really be taxed this much for working so hard?
I haven't researched what occurs when you form a LLC or S-corp yet, so there may be differences with this.
Thank you.
Most Popular Reply
Talk to the CPA about pros and cons of setting up a s corp. You will definitely save some of your self-employment tax. What you need to consider is compliance cost usually $750-$1200 for a separate s-corp return usually depends on how clean your books are. And you will have to file employment tax returns a 941 quarterly and 940 annually and possibly state unemployment and worker's Comp. Everyone's situation is different sometimes it makes sense sometimes it doesn't. A good CPA will go over your options and help you decide what's best for you. I strongly suggest you find someone who owns investment real estate themselves and make sure they have some letters behind their name not one of the franchise tax shops. I promise a good license tax professional will save you much more in tax savings than what they charge you a fees.
Hope this helps, good luck!