tax guidance and help

6 Replies

Hello...I'm a licensed agent that does a handful of flips and I personally list them.

I purchase them under an LLC and I run my agent stuff thru a PLLC...

Would it be tax advantageous to pay myself a commission on the backend when I sell?


Thanks in advance!

JB

@Jody Bowen

When you say “personally list,” are you running it through your broker?

I suppose either way, the less transactions you make is just about always better — friction if money. If you have to have a listing agent commission, of course take it. I know there have been some discussions on bp about negotiating on having the commission applied to the sale/purchase. But that usually gets into a back and forth as to whether that credit is still taxable. I don’t think the accountants (on BP) even agreed.

I’m not sure how the pllc works for a real estate agent. Must be a AZ thing since in nj we can’t do that, ie get our commission paid to an entity.

Does that help?

Originally posted by @Jody Bowen :

Hello...I'm a licensed agent that does a handful of flips and I personally list them.

I purchase them under an LLC and I run my agent stuff thru a PLLC...

Would it be tax advantageous to pay myself a commission on the backend when I sell?


Thanks in advance!

JB

On a very high level, for a personal service S Corp, there might be some saving if you don’t pay yourself the entire net income as salary. Through commission to your Corp, you might be able to decrease your self employment taxes.

That statement has many assumptions built into it. You need to talk to your tax advisor. 


Like so many things in tax accounting, the answer to your question is "it depends." In this case, it depends on the tax treatment of your LLC's. If your LLC's are disregarded entities, more income is more income. Your commission and your gain on a flip are both taxed as regular income and subject to self-employment taxes. If one of your LLC's is taxed and an S-Corp, then there are tax advantages to moving as much income as possible through that one. You have to pay yourself a "reasonable salary," but income over said salary is not subject to self-employment taxes and, even better, is taxed as a long-term capital gain.

*Disclaimer: This post is for general information only and is not a substitute for talking to your tax professional. Individual circumstances are highly variable and must be taken into account when tax planning.

@Jody Bowen

Disclaimer:

I'm not a CPA OR TAX ADVISOR

-I'm self employed my self on an LLC but tax as an SCORP which eliminates selfemployment tax

Now in real estate if you are doing buy n hold then LLC is good for asset protection but flipping an S Corp would do.

Pls consult your CPA. The right CPA who knows real estate and cost segregation a well.

Hope this helps!