Hello All,
So I've heard from someone that if you do more than two wholesale deals a year you will be labeled a dealer. From what I was told that label means that self employment as well as income taxes will need to be paid totaling almost 50% of my income being paid toward taxes.
I know many people on here are wholesaling successfully and I am sure you would not be doing so paying 50% in taxes. So can someone give me some insight as to how you get around this.
Thanx
Disclaimer: The person who said this was not a wholesaler, accountant, or attorney, just a fellow REI.
Replies
Hey Courtney!
Yeah I've heard this too... But I heard more specifically that it's if you're closing deals in your own name and re-selling them under a year. As a wholesaler we would normally be assigning the contract and therefore never closing (our name won't be on the deed). Now if you are double closing A-B B-C, then I would do that in an entity's name. If you don't have enough money to form an entity right now, do one wholesale in your name then use some of the profits to get your entity :-)
But personally I'll always shoot to assign instead of double close (unless my profit is going to be massive! lol)
p.s. I know my response is mad late, but in case you still could use another comment lol
If you have actually started doing deals, congradulations!! If you are just starting, do not worry about it, DO A FEW DEALS, then worry about it. You should be using an entity AFTER YOU HAVE DONE A FEW DEALS. IMPORTANT NOTE TO ALL NEW PEOPLE , do not worrying about it. Thinking about stuff like this will stop you from doing anything. I have seen too many people get stalled by asset protection and income tax liability avoidance worries and NEVER DO ANY DEALS. Go out and do the deals. After you are doing something, call me. Brian Mann 201 704 2336.