Whether you own real estate in your name, an LLC, corporation etc can you please fully explain with an example how you manage taxes?
for example let’s say you owned a rental property in an LLC taxed as a disregarded entity and your profit after all expenses such as maintenance, debt and taxes was $100k and your personal tax rate was 30%
1) Would You pay 30% on that $100k as taxes so $30k and the remaining $70k is yours to keep with no further taxes?
2) For LLC's taxes as a disregarded entity where taxes are paid on the owner level does the money have to do distributed to the owner so they can afford to pay the tax or can the LLC pay it?
The taxation has been confusing so someone please just use an example explaining everything it’s how I learn.
I don't know how or what a disregarded entity is but ultimately all profits from an LLC flow directly to your personal taxes as income and will be taxed at whatever tax rate your personal income is taxed at. Meaning yes, in general, if you show 100k in profit that will flow to your personal taxable income. You will be taxed at your appropriate rate and the rest is yours. Exactly the same as if you were making 100k more in income...because you are.
Don't forget to take advantage of depreciation. It is arguably the top 1 or 2 reasons to even be in real estate.
I don't know how or what a disregarded entity is but ultimately all profits from an LLC flow directly to your personal taxes as income and will be taxed at whatever tax rate your personal income is taxed at. Meaning yes, in general, if you show 100k in profit that will flow to your personal taxable income. You will be taxed at your appropriate rate and the rest is yours. Exactly the same as if you were making 100k more in income...because you are.
Don't forget to take advantage of depreciation. It is arguably the top 1 or 2 reasons to even be in real estate.
Thanks and yes I know about the depreciation write offs. It allows you to depreciate your property on paper when in real life it may be appreciating due to forced or market appreciation.