Self-employment tax? - Posted by Murky

Real Estate Investing Real Estate Law
#1

Posted by Steve Avis, CPA on April 23, 2002 at 22:17:26:

Hi Murky,

The 15.3% self-employment tax is in addition to your regular income tax rates. It is a tax that is calculated separate from your income tax.

You mention that you are a “full-time investor” with your rentals and flips. One would have to make a complete analysis as to whether you would be considered a dealer in real estate. If so, you would be subject to SE tax on your income. If not, you would not be subject to SE tax.

Incorporating might possibly be could for protecting you from being called a dealer by the IRS and to shield your personal assets from business liabilities, therefore, protecting you from being subject to SE tax.

Your question is quite broad, and I would recommend that you sit down with a professional to see what the best business structure is for your needs.

Steve

#2

Self-employment tax? - Posted by Murky

Posted by Murky on April 23, 2002 at 13:01:10:

Is the 15% self-employment tax and addition to your regular tax rates for claiming income on rentals and/or flips???
If I am a full-time investor maintaining rentals and flipping an occassional property, which would be the best business structure for minimizing taxable income? Also asset protection? Thanks in advance!

#3

Re: Self-employment tax? - Posted by JHyre in Ohio

Posted by JHyre in Ohio on April 24, 2002 at 07:10:23:

Allow me to add to Steve’s excellent response…a limited partnership’s limited partners pay no SS tax, and an S-corp’s owners pay SS tax only on their salaries (the S-corp owners must receive reasonable salaries, while limited partners currently face no such requirement).

John Hyre