Rental Property Investor · MN · Member since 2020 · 22 posts · 24 votes
For those of you out there in the BP world that are doing flips and still have a W2 job. Are you projecting the income tax and self employment tax as part of your projections in each individual analysis or are you worrying about that at tax time and not projecting that in the net profit?
When running an analysis I am including these two, income tax per my tax bracket, and 15% for self employment tax. When I factor these in, it makes deals look a lot less attractive.
I also believe you pay self employment tax up to a certain percentage and also income tax is kind of a sliding scale as well.
Further to what @Allan Smith said, don't forget that real estate has excellent tax deferment strategies for house flippers, such as 1031 exchange, etc. Don't drive yourself crazy with tax analysis on profits, just find a CPA.
Contractor · Nashville, TN · Member since 2014 · 1k+ posts · 1k+ votes
3y
Most deals in any industry are evaluated by pre-tax profit. Then the CPA comes in to optimize tax strategy with whatever profit and operations are going on. Set aside 25% or so for taxes cone April. It is recommended that instead you make quarterly estimated payments to irs.
Further to what @Allan Smith said, don't forget that real estate has excellent tax deferment strategies for house flippers, such as 1031 exchange, etc. Don't drive yourself crazy with tax analysis on profits, just find a CPA.
i don't make a household budget based on pre-tax income. I don't know why you'd leave taxes out of deal analysis. 15-40% of your gross income could be vaporized. I'd rather at least make a reasonable estimation and then hope an accountant can work some magic afterward.
Further to what @Allan Smith said, don't forget that real estate has excellent tax deferment strategies for house flippers, such as 1031 exchange, etc. Don't drive yourself crazy with tax analysis on profits, just find a CPA.