Financial Partner on Flip. How much should I set aside for Taxes?

Question

I'm partnering on my first flip with an experienced investor. I'm providing capital in exchange for percentage of sale profit. Following the sale, I should net somewhere around $20,000. I need to know, if he reports the profit for me via 1099-INT, what % should I responsibly set aside for taxes. I'm a military member living in NYC, my residency is in FL.

Again, I am ONLY providing money for flip. No mortgage, no swinging hammers, no employment. Straight Financial partnership in exchange for net proceeds.

Thank You in advance for being awesome.

Again, I am ONLY providing money for flip. No mortgage, no swinging hammers, no employment. Straight Financial partnership in exchange for net proceeds.

Thank You in advance for being awesome.

Ashish Acharya · Answer

Looks like you are just a limited partner.  If you invest as a limited partner, you do not need to pay the 15.3% SE taxes.

Wayne Brooks · Answer

Whatever your fed income tax rate will be on the $20k, plus 15.3% self employment tax (ss/med).  Flipping income is not cap gains, it is ordinary income.

Adam Scheetz · Answer

@Ashish Acharya that's great news.

Adam Scheetz · Answer

@Wayne Brooks Well that sucks. I'm married filing jointly and thankfully come in at the 12% rate by staying under $77,400 taxable amount. But 12% + 15.4% makes for a painful tax pill to swallow. What are the work arounds to avoid that additional 15.4%??