Real Estate Investor · Albuquerque, NM · Member since 2011 · 156 posts · 20 votes
Do you just print copies of the checks you made and keep them as your stubs, and save them come tax time and take them to H&R block, or how exactly do you do it?
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
15y
I concur with Tom. I live and work in CA and have wholesaled more than 8 times and I have no RE sales license, nor do I need one. What I do have are entities and trusts which I funnel deals through and I pay my taxes according to the net profits for each entity. For my S Corp, I receive a salary plus I get dividends which are taxed at only 15% as opposed to the marginal tax rate.
Check with your own CPA, however, good record keeping is essential in any business, particularly RE. I strongly recommend you use an entity (speak to your tax attorney or professional advisor experienced on this subject) and not flip RE in your personal name. As such, having a good accountant is just one of many team members you should be using, H&R block is for W-2 employees with basic returns!
Residential Real Estate Broker · la mirada, CA · Member since 2011 · 66 posts · 12 votes
15y
Please consult your tax advisor, and yes you make the copies of every check, and keep records of all expences, it will come down as to if you do a schedule C (business) and depending on the state llike in california after 8 deals you have to have a license.
Real Estate Investor · Manassas Park, VA · Member since 2011 · 37 posts · 3 votes
15y
Originally posted by willingtolearn:
Please consult your tax advisor, and yes you make the copies of every check, and keep records of all expences, it will come down as to if you do a schedule C (business) and depending on the state llike in california after 8 deals you have to have a license.
Since when do you need a license to Wholesale property in California, or any state?
A wholesaler is kind of like a RE Broker, but not really. A wholesaler is buying and then reselling the property. I can buy 500 homes a year, and not need a license.
Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
15y
I concur with Tom. I live and work in CA and have wholesaled more than 8 times and I have no RE sales license, nor do I need one. What I do have are entities and trusts which I funnel deals through and I pay my taxes according to the net profits for each entity. For my S Corp, I receive a salary plus I get dividends which are taxed at only 15% as opposed to the marginal tax rate.
Check with your own CPA, however, good record keeping is essential in any business, particularly RE. I strongly recommend you use an entity (speak to your tax attorney or professional advisor experienced on this subject) and not flip RE in your personal name. As such, having a good accountant is just one of many team members you should be using, H&R block is for W-2 employees with basic returns!
Real Estate Investor · Albuquerque, NM · Member since 2011 · 156 posts · 20 votes
15y
How soon would is it recommended to start an LLC? I wouldn't want to be wholesaling a lot of houses and come tax time I owe uncle sam half of what I earned. I've read you want to avoid dealer status at all costs, so with that being said, when is the best time to start LLC? By the way I plan on consulting with a CPA and Attorney, just would like someones input.
Real Estate Investor · Northeast TN, TN · Member since 2008 · 516 posts · 361 votes
15y
Originally posted by Matt J.:
Do you just print copies of the checks you made and keep them as your stubs, and save them come tax time and take them to H&R block, or how exactly do you do it?
Matt, H&R Block is NOT the place to have your wholesale business tax return prepared - or any business return prepared for that matter. Like Will said, it may be appropriate for a "W-2 return" but not for a business. Over the years I have reviewed and amended hundreds of returns prepared at Block, Liberty Tax and similar franchise outlets. You need to be dealing with a tax preparer that is well versed in tax strategies for real estate investors.
Originally posted by Matt J.:
I've read you want to avoid dealer status at all costs, so with that being said, when is the best time to start LLC?
Sorry, Matt, but you can't avoid dealer status as a wholesaler. It is what it is. And "dealer income" is earned income so is subject to self-employment tax. For that reason, if you are doing several wholesale deals I would get your LLC formed asap and elect to be taxed as an S-Corporation. This will let you shield a significant amount of your earnings from the 13.3% (for 2011) self-employment tax.