Am I calculating this correctly? TAXES

[Brent Baumann]

I have an appointment to meet with a CPA on Monday, and am researching everything now to test his knowledge in real estate planning.  (any specific questions to ask would be helpful)

I looked at all of the different taxes flippers are charged and broke it down if I were to make $100,000 in annual profits.

$100,000   net profit

(15,300)     self employment taxes (social security/medicare)

(6,750)       state/county tax (ohio)

(1,855)       10% of first $18,550 (filing joint married)

(8,512)       15% of 56,750

(6,750)       25% of 24,700   (bringing us to 100,000)

----

$61,407    take home or 38.6% taxation (absent deductions)

Am I missing anything?  How is this possible, how can we really be taxed this much for working so hard?

I haven't researched what occurs when you form a LLC or S-corp yet, so there may be differences with this.

Thank you.

[Cameron Skinner]

Talk to the CPA about pros and cons of setting up a s corp.  You will definitely save some of your self-employment tax.  What you need to consider is compliance cost usually $750-$1200 for a separate s-corp return usually depends on how clean your books are.  And you will have to file employment tax returns a 941 quarterly and 940 annually and possibly state unemployment and worker's Comp.  Everyone's situation is different sometimes it makes sense sometimes it doesn't.  A good CPA will go over your options and help you decide what's best for you.  I strongly suggest you find someone who owns investment real estate themselves and make sure they have some letters behind their name not one of the franchise tax shops.  I promise a good license tax professional will save you much more in tax savings than what they charge you a fees.

Hope this helps, good luck!