Rental Property Investor · Brunswick, GA · Member since 2016 · 40 posts · 13 votes
I just sold my first flip! Was able to get a great deal on a MH and turned it for a great profit. Was all in at just under $50,000 and sold it for $75,000. Now for the sad part..... TAXES. How much should I set aside? I took a big pay cut to position myself for doing real estate so I'm guessing my net income will be under $75000 unless I can find another good deal. If that happens I will still be under $100,000 filing married/joint. I believe Georgia has a 6% rate.
CPA · Raleigh, NC · Member since 2013 · 1k+ posts · 2k+ votes
10y
Without knowing anything about your situation, you should probably aim to set aside roughly 35% of your net income after deductions. This assumes a 25% tax bracket, a 6% state bracket, and a 15.3% self-employment tax that is not being avoided via an S-Corp. You'll notice that the sum of these numbers is actually 46.3%, but I'm saying 35% due to how your tax liability scales as you move up tax brackets.
Rental Property Investor · Brunswick, GA · Member since 2016 · 40 posts · 13 votes
10y
Thanks Brandon. We are setting up an LLC now. Seems like I'm doing things in reverse but I will get there all the same. Will the self-employment tax be avoided using an LLC? Shame taxes take so much of your profit! That's gonna make it harder to turn another deal....
CPA · Raleigh, NC · Member since 2013 · 1k+ posts · 2k+ votes
10y
@Tony Roddenberry an LLC taxed as an S-Corp will help to avoid SE tax but an LLC alone will not provide tax protection.
There are other tax mitigation strategies you can utilize. It's probably best that you call up a CPA and get one on your team, especially if you are planning to grow this business (and you should since you're obviously good at it).