All Forum Posts by: Joshua Thompson

You're right on the not putting the property in an S-Corp. However, when you are an LLC and elect to be taxed like an S-Corp in CA to get around the gross receipt tax, that's different than having the properties in an S-Corp isn't it? Correct me if I'm wrong

@Kaveh E.

Not a tax professional, but what you may be able to do to is form an LLC but elect to be taxed as an S corp. This should get rid of the California gross receipt tax that I believe you are referring to.

As far as the $500k ($250k if single) exclusion, if the property is your primary residence and you meet the requirement (a big one being have lived there for 2 of past 5 years) you can exclude up to $500k of the gain. However, once you start getting into the whole short term rental of the property I would recommend finding a good CPA/EA that specializes in real estate.

Also if the property is your primary residence and you aren't renting it at the moment I don't see a need to put it inside of an LLC. Honestly, it may be more of a headache then its worth.

Don't stop here, find a good professional there are plenty on BP. Good luck

Well first I would make sure they work with other clients in your industry and possiibly specialize in the industry. A CPA/EA that specialize in your industry COULD be worth the extra dollars instead of using a general CPA/EA. Good first place to start.

 Got it. Thank you for the response!

How much you'll pay in taxes would be hard to calculate with the information given. I'm sure one of the tax pros here can give you the max % and you can use that to be safe. As far as I know, because it's a flip I'm pretty sure you'll need to pay SE taxes (15.3%) and ordinary income tax (whatever your tax bracket may be) as well as any depreciation recapture you took in 2018 (this year tax return) which I would assume none because you were probably still in the process of renovating. 

You also have to look at what you hope to achieve from investing in real estate. Do you want to make the flip money or build a portfolio with passive income?

Regarding your waiting one year, I believe (and anyone correct me if I'm wrong) if your intent is to flip the property you're still going to need to pay the SE tax. I'm pretty sure no matter what your flip will not be taxed at the capital gains rate but at the ordinary income rate. Not too sure on this one though.

You would also have to look at 5% of the sale price will go to the agent (unless you negotiate it out). However, no matter when you sell it a percentage will be going to the agent.

*Not a CPA, EA or tax professional. Maybe a few more years till then*

If the situation was different and David was flipping properties inside an LLC would he still be safe from SE tax?

My guess would be yes he would still be safe but if it was a sole prop then he would be subject to SE tax.

@Sean Rhodes Not 100% but I think you can deduct the portion or percentage of the home that is a rental and deduct that percentage of mortgage pauments. Would love to know the correct answer if you find one! Good luck man!

 Curious on how this turned out.

The way it usually works with a regular rental (Single Family Residence) is you'll input your gross rental income then input your expenses to offset that income. However, since you're house hacking I think that's where things get a little tricky and at which point I would recommend reaching out to a CPA or EA that has dealt with this before. You may get broad advice on the forums because what is right for you won't be right for the next guy. The forums will help with gathering knowledge to speak somewhat intelligently when looking for that CPA or EA.

Try to find one quick man April 15th is coming and most tax preparers are probably in crunch time.

 Nope, that's not something I need, just some clarifications. If there are easier ways to get things done without sacrificing quality I'm all ears. Thanks for your responses!