Posted by Tim Harris on February 21, 2002 at 10:33:33:
Thanks a lot Chuck!! And it should have dawned on me that gross income has no relation to taxable income. Duh!! Thanks for waking me up.
Taxes on Flipping Properties - Posted by Tim Harris
Posted by Tim Harris on February 19, 2002 at 12:28:01:
After reading John Hyre’s “Are You a “Dealer” Or an “Investor””, it was fairly apparent to me that flipping several properties within a year will most likely qualify you as a dealer rather than an investor. Therefore (as a “dealer”), what would be the approximate amount of income tax paid on roughly $100,000 of annual gross income generated by flipping say about 5 properties. (e.g. 31%, 28%, or ???) And what would be the difference in tax paid for sole proprietorship vs. LLC or S/C-Corporations?
Re: Taxes on Flipping Properties - Posted by JHyre in Ohio
Posted by JHyre in Ohio on February 21, 2002 at 13:27:45:
Good answer from Chuck V. In addition, S-corp can help you save on social security taxes, as compared to an LLC. A C-corp is more involved- it can save money, particularly where certain perquisites are involved (medical care, etc.)…the decision to use a C-corp is VERY fact specific.
John Hyre
Re: Taxes on Flipping Properties - Posted by Chuck V.
Posted by Chuck V. on February 20, 2002 at 09:03:19:
It is impossible to tell what the tax would be paid on $100,000 of gross income. Taxes are based on net income, which is dependent on deductions and expenses available to offset the gross income. It also depends on other sources of income you may have.
The taxes paid under a sole proprietorship are the same as paid by an individual since all income from the proprietorship flows directly to the individual owner’s tax return. LLC’s and S-Corp’s (assuming partnership tax treatment is elected) don’t pay tax at the entity level. The income flows through to the members’ individual returns and are taxed at the individuals’ rates. A C-Corp pays tax at the entity level. Whether the rate is higher or lower than the individual rate will depend on the individuals’ income level.