All Forum Posts by: Frank Palomino

@Gregorio Martinez the reason capital gains tax isn't really discussed when flipping a property is that it falls under different rules. When you flip a property you're essentially buying and selling inventory. Since most flipping transactions have a quick turnaround, the idea is that any profit is derived from the ordinary course of business. Not only is the income you make by flipping taxed at whatever your marginal rate is, it is also subject to Self-employment tax (this can be circumvented with proper entity structure and planning). 

@Anthony R. it's hard to determine any tax surprises without having a full picture of your financial situation. However, would it be safe to assume that the federal withholding from your W-2 job covered most (if not all) of your tax liability in years past? If so, you're now going to have to calculate and submit estimated taxes on a quarterly basis. This can prove to be difficult if you're not prepared to dish out those funds when required. BUT with good communication and tax planning with your CPA you should be able to mitigate the impact this may have on you.

Glad to have you @Chris Caffey! I'm a new investor in the Golden Triangle area as well. There's a lot of great content on here. Enjoy!

@Alex Saleeby thanks for mentioning the REIA groups! I've been looking for something like in the Beaumont area to get involved with. I will definitely be looking into it!

Awesome!! Congrats on finding such a great deal! Wishing you continued success!

I'm not claiming there's an exemption for real estate professionals. I'm stating that landlords who are not considered real estate professionals and are receiving rental income in a passive capacity, are not required to file forms 1099. They are required to file forms 1099 when the level of their rental activities rise to that of a trade or business.

@Chinmay J. I'm sorry you're confused! Being a realtor immediately qualifies you as a real estate professional. I'd recommend making sure you get those 1099s filed this year.

@Chinmay J. my understanding is that unless you're a "real estate professional" you may forego the reporting requirements. However, I consider it best practice to issue them. They're easy to file and you can do it yourself. If you're not comfortable doing it, your CPA can get it done at a minimal cost.

 The purpose of a 1099 is not to verify your expense. Rather, it is a compliance tool that helps the IRS in determining an individuals taxable income. In the event of an audit, if it is determined you should have issued a 1099 and you did not make any attempt, you'll be slapped with some hefty penalties. I'd suggest taking the time to get them done. 

Andy, you're correct. Some states and counties may impose these fees/taxes; however, they are minimal and normally less than a percent. For Wisconsin, the current transfer tax rate is 0.3%. That would mean in your scenario on the refi for $100K, a transfer tax of $300 would be imposed.