Do i have to pay income taxes as a wholesaler?

Question

Hello, i am starting out in wholesaling and hoping to start my first deal soon and was wondering, do i need to pay income taxes on what i make?! Thanks

Jay Hinrichs · Answer

OK now that I am done laughing .. of course you have to pay income tax

just think of all the criminals that were put into jail not because they got caught doing criminal activities but for tax evasion.

check your state.. there is a minimum where you don't have to pay tax.. but if your total income is over that then you do.

good luck and by all means pay your tax's us old guys will need our SSI benefits

Kyle J. · Answer

Income from wholesaling is taxed as ordinary earned income, NOT capital gains.

Steven Myers · Answer

This is why I tell my kids college is not important

Natalie Kolodij · Answer

100% Wrong.

Wholesaling is ordinary income subject to income tax like any thing else.

Whether you are buying wood building tables and reselling them

Or buying contracts and reselling them

Or buying houses, fixing them up and reselling them

It's all the same to the IRS.

So the bottom line is- if you're not positive on answer I'd hold off on advising people on it.

Fred Heller · Answer

I'm not an accountant but I do have an Accounting degree, so if I'm accurately remembering the stuff I learned in college, the answer is yes and no.

You're not going to pay "income" tax because income is wages, tips, etc. ; basically whatever is listed on your W2 at the end of the year.

But you are subject to capital gains taxes. Capital gains are profits you earn from buying and selling something like homes, stocks, etc.

Here's where it's going to get you. Long-term capital gains are taxed at a much lower rate than short-term capital gains. I think the current rate is 15%. To qualify for long-term capital gains, you have to own the asset for at least one year.

Since wholesaling, by its very nature, is holding on to something for 20 minutes, there is no way you will qualify for the long-term capital gains rate. So that means you'll be subject to the short-term capital gains tax, which is taxed at the same rate as regular income.

So the bottom line is you won't pay income tax on your wholesaling activities, but you will be subject to capital gains taxes which will be taxed at the same rate as income taxes.

Anas B. · Answer

I believe capital gains taxes will only apply if title changes to the wholesaler, which, in most instances is not the case. The wholesaler usually assigns the property sale contract to the buyer, so title never actually changes to the wholesaler.

Richard C. · Answer

Sorry Fred, but you are actually very wrong about this. Wholesalers are engaged in business, and the properties they "own" are inventory, not investments. Taxable as income. Wholesalers also have to pay both halves of the FICA taxes.

Alan Grobmeier · Answer

@Joshua Smith, you can try a solo401k, but it will be dependent on your situation. If you CAN go the solo401k route, you can shelter up to 53k for you and 53k for your wife.

But you need a CPA to assist you to figure out your eligibility.

Today!

Joshua Smith · Answer

@Brandon Hall I am about to close on a $100K wholesale deal in DC. I REALLY do not want to have to pay self employment taxes on the money so that I can invest quickly somewhere else and was wondering if creating an S Corp for this activity would be a good strategy for that. I could pay myself a "reasonable salary" (it probably took me 10 full hours to get this deal done) and not have self employment taxes be levied on the rest. Do you have any thoughts on that?

Also is there anywhere I can find more information about your services? I've filed a tax return extension and am looking for a CPA. Thanks.

Do i have to pay income taxes as a wholesaler?

Do i have to pay income taxes as a wholesaler?

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