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Updated 6 months ago on . Most recent reply

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Kaylin Gonzalez
  • Ocala, FL
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Greg Scott
#3 General Real Estate Investing Contributor
  • Rental Property Investor
  • SE Michigan
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Greg Scott
#3 General Real Estate Investing Contributor
  • Rental Property Investor
  • SE Michigan
Replied

This simple question is fairly complex.

Cashflow is not the number that is taxed.  Net income is what gets taxed and that is different than cashflow.

If you are managing your business correctly, usually cashflow is higher than net income because depreciation expense lowers your net income and depreciation is a non-cash expense. We love putting cash in our pocket and paying little or no tax.

On the other hand, you can create situations in your business where you generate positive net income that does not result in cashflow.   In that case, you would have no cash in your pocket but get tax bill.

Assuming you are using an LLC or a sole proprietorship, you pay the taxes on net income when you pay your personal income taxes.

  • Greg Scott
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