All Forum Posts by: Marc Biedenkapp

Thanks for the reply. 

The properties were bought under a private person's name. Does that help me in any way? 

Thanks. 

Marc

Hi there,

I have bought and sold 2 properties over the last 3 years. My tax agent just told me that I would have to pay 15.3% self-employment tax since it's considered a business. But 2 houses in 3 years can hardly be a business - it's an investment strategy and should never be taxed as a business. Where is the actual threshold? How many properties in what period of time are considered business?

Can someone please help me shed some light into this?

Thanks a lot in advance.

Regards,

Marc

Hi there,

my sister and I have flipped 2 properties over the last 2 years and now the tax payment is due. Unfortunately we both aren't particularly well informed in that department and I would really like to get a second opinion since it appears to be fairly high. 

This is the explanation of the tax agent:

With Petra's income so low and her educational credit she has a zero tax liability. When we add in the profit for the sales of all three houses this adds $50,489. to her income. Because this is a business there is self employment tax of 15.3% or $7,724.82 which you both split. This increase also causes Petra's tax bracket to change from 15% to 25%. Her educational credit went up a little because of the increased income so I let that in the equation, as it is better for the both of you. Petra's income tax liability went up by $7,365.18, which you both split. So if you add the self employment tax and income tax together you come up with $15,090.

And here are my questions:

1. Does it have to be taxed as a business?

2. Would it really increase the tax bracket by 10%

3. Is that calculation reasonable and the best possible way of doing it?

Thanks a lot in advance. Any help will be greatly appreciated!

Regards,

Marc