Is a 23% Effective Tax Rate Too High?

[Luke J Nelsen]

Hey BP Fam,

I just got off the phone with my CPA and it sound like me and my wife's effective tax rate will be upwards of 23%!! When I first started in real estate last, everyone made it sound like an incredible tax haven, etc. Unfortunately, I have not had that same experience first hand. I am being told that many of the tax benefits are not applicable if your income surpasses a certain threshold. My wife has a W2 and I am a 1099 real estate agent in WI. We own LTRs in Wisconsin and STRs in the Smokies near Pigeon Forge. We run all properties thru our LLC and I have a separate LLC for my realtor business.

Are there any CPAs that can weigh in on this? I want to make sure I am utilizing as many tax benefits as possible. And, maybe I am! But, would love to hear some of your tricks of the trade if you'd be willing to share.

Thanks,

Luke

[Basit Siddiqi]

@Luke J Nelsen

1) Given that you are a real estate agent, you may be eligible to claim real estate professional status which will not restrict you from the income limitations of 'real estate tax' benefits.

2) 23% effective tax rate is all relative.
If someone is making Net income of $1,000,000, 23% may be low.
if someone is making $200,000, it may be considered high

3) We also don't know if the 23% effective rate is just federal or Federal + State.

Best of luck