Self-employment tax-not required? - Posted by James B

Posted by JHyre in Ohio on May 06, 1999 at 06:52:59:

Another messy question of fact, depending on all the details. If I spend less than 500 hours per year managing my own property, usually no active business and hence no problem. If more than 500 hours, IRS has a decent argument that an active business exists- I’d think of using an S-corp to avoid payroll taxes at this point…once search engine is working, search for conversion I had with Jamie R (Polish/East European last name- I’ll be darned if I can spell it) on this exact topic. If you manage someone else’s property, you very likely have an active business that produces wage income if you are in LLC form- again, look at using an S-corp if your emphasis is on avoiding payroll taxes and you don’t need the LLC’s flexibility with partners.

John Hyre

Self-employment tax-not required? - Posted by James B

Posted by James B on May 05, 1999 at 09:49:20:

I heard on a financial radio show that you do not have to pay the self-employment tax (currently around 15%) on income from your rental properties. So anotherwards, say I make 75K/year on my rental properties, I only have to pay fed. and state tax. Is this correct?
If it is correct, this is even more an incentive to own rental property.
James B.

Essentially correct… - Posted by JHyre in Ohio

Posted by JHyre in Ohio on May 05, 1999 at 10:16:59:

be sure to distinguish between the ownership of passive property- which is not subject to payroll taxes- and running a property management business, which is subject to such taxes.

John Hyre

Re: Essentially correct… - Posted by Steve Heller

Posted by Steve Heller on May 05, 1999 at 19:32:43:

Hi John,

Appreciate your post. Is it your understanding that the private investor who holds 10-20 properties or more is not a property management company? Could you explain who you believe to be a ‘property management company’.


Steve Heller