part time real estate agent tax - are they double taxed?

[Henry Li]

so... both my wife and I have a W2 job. let's say our income is at around the 24% tax bracket. And then my real estate sales "part time"  let's say I made 50k in 2019. Does it mean the 50k commission income has to be taxed our ordinary income tax rate 24%, plus the self employed tax which is about another 15%? If so then that it would be about 40% tax that we have to pay? Sounds a bit too much and would like to get some clarification. thank you in advance. 

[Adam Rasmussen]

Henry - definitely a fair question and there are a few variables here. Short answer is yes, you are definitely tracking with the percentage there. Having said that, with you being the 24% bracket you may have already maxed out (or close to) the Social Security wage base of $130k. 

This means that if your W2 earnings are over $130k, you have already maxed out the social security wage base and will only need to pay the Medicare portion of the Self Employment income. Why is this a big deal? The Social Security tax makes up 12% of the 15% SE tax. If you have $130k of W2 earnings and $50k of commissions, then you only pay about 27% in tax (24% bracket + 3% Medicare tax) on the extra $50k.

Also, each taxpayer has their own social security wage base so it is dependent on how much you have in W2 income and who is claiming the commission income. Best to talk to a CPA to do some planning. Could look into filing your business as an SCorp but it may not make sense if the extra tax is only 3%. 

Hope that makes sense.