Wholesaling and taxes

[Carter Bushman]

Hey all, I’m working on wholesaling right now and to be honest I don’t know much about taxes. I’ve only had to do my taxes once or twice and only through turbotax and such. Is there a certain percentage of my wholesaling profits I should expect to pay for taxes?

[Michael Plaks]

Originally posted by @Carter Bushman:

Hey all,

I’m working on wholesaling right now and to be honest I don’t know much about taxes. I’ve only had to do my taxes once or twice and only through turbotax and such. Is there a certain percentage of my wholesaling profits I should expect to pay for taxes?

Looks like you're talking about setting aside taxes for your future profits.

First, let's define "profits." It's all your assignment fees MINUS all expenses - such as marketing, education, driving (a big one!) etc. Whatever is left after these deduction is called net business income, or unofficially profit. It will be subject to 3 taxes, as @Basit Siddiqi explained: Federal income tax, Utah state tax, and Federal self-employment tax (Soc Security + Medicare). 

Together, they end up being anywhere between 15% and 40%. A rule of thumb is to set aside 1/3 of the net profit. Since you do not know your expenses, then you can instead use 1/4 of gross (before expenses) income. In other words, set aside 1/4 from each assignment check for taxes.

Good luck wholesaling! Tough to start, but could be rewarding.