Do i have to pay income taxes as a wholesaler?

10 Replies

Hello, i am starting out in wholesaling and hoping to start my first deal soon and was wondering, do i need to pay income taxes on what i make?! Thanks

OK  now that I am done laughing .. of course you have to pay income tax

just think of all the criminals that were put into jail not because they got caught doing criminal activities but for tax evasion.

check your state.. there is a minimum where you don't have to pay tax.. but if your total income is over that then you do.

good luck and by all means pay your tax's us old guys will need our SSI benefits

I'm not an accountant but I do have an Accounting degree, so if I'm accurately remembering the stuff I learned in college, the answer is yes and no.

You're not going to pay "income" tax because income is wages, tips, etc. ; basically whatever is listed on your W2 at the end of the year.

But you are subject to capital gains taxes. Capital gains are profits you earn from buying and selling something like homes, stocks, etc.

Here's where it's going to get you. Long-term capital gains are taxed at a much lower rate than short-term capital gains. I think the current rate is 15%. To qualify for long-term capital gains, you have to own the asset for at least one year.

Since wholesaling, by its very nature, is holding on to something for 20 minutes, there is no way you will qualify for the long-term capital gains rate. So that means you'll be subject to the short-term capital gains tax, which is taxed at the same rate as regular income.

So the bottom line is you won't pay income tax on your wholesaling activities, but you will be subject to capital gains taxes which will be taxed at the same rate as income taxes.

This is why I tell my kids college is not important

Income from wholesaling is taxed as ordinary earned income, NOT capital gains.

Yes, you have to pay incometax. Each and every people need to pay incometax who come in that criteria.

Originally posted by @Fred Heller :

I'm not an accountant but I do have an Accounting degree, so if I'm accurately remembering the stuff I learned in college, the answer is yes and no.

You're not going to pay "income" tax because income is wages, tips, etc. ; basically whatever is listed on your W2 at the end of the year.

But you are subject to capital gains taxes. Capital gains are profits you earn from buying and selling something like homes, stocks, etc.

Here's where it's going to get you. Long-term capital gains are taxed at a much lower rate than short-term capital gains. I think the current rate is 15%. To qualify for long-term capital gains, you have to own the asset for at least one year.

Since wholesaling, by its very nature, is holding on to something for 20 minutes, there is no way you will qualify for the long-term capital gains rate. So that means you'll be subject to the short-term capital gains tax, which is taxed at the same rate as regular income.

So the bottom line is you won't pay income tax on your wholesaling activities, but you will be subject to capital gains taxes which will be taxed at the same rate as income taxes.

 Sorry Fred, but you are actually very wrong about this.  Wholesalers are engaged in business, and the properties they "own" are inventory, not investments.  Taxable as income.  Wholesalers also have to pay both halves of the FICA taxes.

Christopher Michalski please disregard everything @Fred Heller said. While he was trying to help, it was not in the least bit accurate.

Income earned from wholesaling activities will be classified as ordinary income and taxed at your ordinary rates.

You will be considered a self employed individual and file schedule C on your tax return which also subjects your wholesaling income to self employment taxes.

I believe capital gains taxes will only apply if title changes to the wholesaler, which, in most instances is not the case.  The wholesaler usually assigns the property sale contract to the buyer, so title never actually changes to the wholesaler.

Originally posted by @Anas B. :

I believe capital gains taxes will only apply if title changes to the wholesaler, which, in most instances is not the case.  The wholesaler usually assigns the property sale contract to the buyer, so title never actually changes to the wholesaler.

 Doesn't matter.  Even if the title does go to the wholesaler, he is still not going to qualify for capital gains tax treatment.