Do i have to pay self employment tax on flips?

[Stephen N.]

I just read a post where someone said you may have to pay SET on income from flips. Is that true?

[J Scott]

Originally posted by Frank Adams:

Regardless of how much state tax you pay you do NOT PAY FICA on flip income, nor rental income for that matter, so you're not approaching the 50% hit. Unless my CPAs have been doing it WRONG for the last 32 years.

If this is really the case, it's quite possible that your CPA has been doing it wrong. Because you *are* subject to FICA taxes on self-employment income (either as a sole proprietor or as a salaried employee of a company you own).

Most likely, there's something you're missing. For example, if you make over $106K in your full-time job, all your FICA is coming from there...and therefore you won't be on the hook for FICA for the additional income you earn from flipping. Or if your accountant is having it paid all to you as a dividend instead of salary (which wouldn't please the IRS at all).

But, that said, any self-employment income (including ordinary income from flipping houses) is subject to FICA up to the IRS limits.

I'm not a tax professional, but this is pretty basic tax stuff...you should probably have a chat with your CPA just to be safe...