Home Office/Self Employment Tax Question

[Dennis Dempsey]

I wanted to describe a situation and see if anyone can tell me what the tax implications are: You get your real estate license to help with your part-time investing business and don't use it as a typical agent would. That is, you're not out there trying to sell people houses, not even your rehabs. You're a part time flipper that does 2-3 deals a year and has a regular W-2 job. You do all of your area/property research from home in your spare time. Would you have to pay a self employment tax or a home office tax since you're now a licensed real estate agent? Or, would those not apply because you're doing it part time? Asking for a friend...

[Patrick Liska]

Dennis,

 I am not a CPA, but i believe because a licensed is held as a real estate professional you would now have to pay self employment tax, you are not working for someone and it is not considered passive income. your home office space is actually tax deductible at that point, you do not pay tax on it. but there may be a percentage involved that you can deduct if you are only doing it part time and have a W2 job. so if your office uses 5% of your house, you can deduct only 5% of your expenses, but throw in that it is part time, you may only be able to deduct say 25% of that 5% of space, best you talk to your CPA on that.