Realtors and Re-habbers – The New Tax Reform | Mark J Kohler | CPA | Attorney
Articles,  Blog

Realtors and Re-habbers – The New Tax Reform | Mark J Kohler | CPA | Attorney


Hi mark Kohler here with another important tax and legal tip for my realtors and re-habbers. Yes, those small business owners I love that are out there creating ordinary income doing real estate transactions every day now. This is exciting there’s some good things in the new tax reform for the realtor rehabber, but believe it or not they’re different and It’s almost worse for the realtor in some ways So let’s break it down and see what you need to know when it comes to filing your taxes so our two groups And they’re gonna be treated differently Realtors and Rehabbers now in both of these situations when my clients are out making money And this is not buying rentals This is buying a property and flipping it within twelve months and my realtor is getting commissions if you’re gonna make more than fifty grand So let’s say Maybe seventy five grand and gross sales twenty five in expenses and net fifty you might be just getting started as a realtor Maybe your first rehab So you’re just getting rolling now of course many of you have Bigger aspirations than that and you’re gonna net maybe a hundred grand or more. That’s our goal, right? that’s a sweet spot for a lot of my clients that are Realtors and rehabbers making a hundred to two hundred grand a year and That’s it that’s middle-income America or better, and that’s what we’re shooting for now What’s our strategy here and what’s going to be different under the new tax law now first? We’re going to compare apples to apples and all your revenue of course is going to go through an S corporation that does not change And I’ve got a lot of material out there you’re gonna want to check out my blog get to my weekly free newsletter the informations down below and videos on how the S Corp is still the most powerful entity for saving on FICA and getting the twenty percent deduction Pass-through write-off you’re gonna see it here big But it’s a double whammy you want to be doing both so whether you’re a realtor or you’re a rehabber you’re gonna want that revenue to flow through your S corp, so let’s say you’ve got 150 grand of income and 50 grand and expenses you’re going to 100 you’re gonna get the same equation in this When you’re either a realtor rehabber now a rehabber you might have more gross revenue, but you’re gonna have repairs, or I should say Construction costs improvement costs and you’re gonna net 150 gross, so you might sell a couple rehabs and make 150 And then you’re gonna have your standard expenses of 50. That’s what we’re talking about here Home Office travel meals Internet cell phone dining all that kind of stuff is going to be here, and then you’re gonna net 100 now under both scenarios we’re gonna generally take at least maybe a $40,000 salary kind of a 60/40 split and you’re gonna have a salary with a w-2 and a net of 60 okay now this gets us to an important point here and This is going to be The baseline for the new tax reform law so right here all my Realtors and rehabbers Making money are gonna be in an S. Corp scenario You’re gonna say FICA here of almost nine to ten thousand dollars right off the bat, so we’re gonna want to be an escort That’s 9 grand and savings. Be careful think you know I want this passenger deductions are going to be a sole proprietor, or I want a corporate tax break of a rate of 21% so I’m gonna be a C-corp or a sole proprietor guys every time I do the math the S corp wins so this is our baseline now What does the tax reform bill give us on top so when your tax reform? we’re gonna see two different scenarios believe it or not you’re both doing real estate, but The successful realtor takes it in the shores now. Let me explain why? both of you get a 20% Deduction on the pass-through income be careful hearing about a special rate There’s no special pass through rate you get a special 20% deduction so you would off the 60 grand you would get a $12,000 deduction and so you’d be down to 48 of income well I’d rather get taxed on 48 grand rather than 60 grand good thing well the rehabber you get the same deal you get a 20% deduction of $12,000 and your net is 48 this is how Congress? Donald whatever felt that we were going to stimulate the economy is that with this $12,000 in savings the rehabber might go out and hire more employees the realtor might go out and close more deals peddle a little harder, maybe and hire an assistant so you’re gonna get the Economy going with this tax reduction you’re gonna get Injected back into the system at least you may even go buy a big-screen TV Which I do not recommend get out and save this money set up a 401k on the site topic for another day now Where’s the difference? Here’s the difference? Because this is personal service. You’re out as a broker agent Selling a service, and this is the same thing for dentists and doctors and engineers and accountants I’ve got other videos up for those poor professionals getting hit with this is that if you’re a successful realtor this starts to phase out at a hundred and fifty seven thousand if you’re single and If you’re married filing joint three fourteen so if you’re making Over three hundred fourteen married couple over one hundred fifty seven thousand single this twenty percent deduction Phase this out gone. That’s right if you make more than these two figures 157 single three hundred fourteen married filing joint Then you don’t get this right on now, I know that’s gonna make some of you mad, and you’re gonna say mark You’ve got a loophole for me And no not at this point this is personal service. This is out hiring contractors subcontractors Workers employees They see this as stimulating the economy more So there’s no phase out now some of you do in rehab rehabbing or whistlin Dixie right now I get it now mind you realtor’s I have a lot of Realtors out flipping properties And they’re gonna love to flip some properties because you still get the pass-through rate on this Even though you may not get it over here Now I need to say this again This is a tax law that’s evolving There’s gonna be I RS regulations and cases as we figure out a lot of this phase-out stuff on Your AGI and what type of income you’re generating and do you get the phase-out here, but not over here stay tuned Please give to my website sign up for my newsletter And I’ll be keeping you posted please subscribe to the YouTube channel as I get more videos on this topic I’ll be shooting them here for you for you, so please be it pay attention to this so realtor’s you got a phase-out problem I guess the rule is don’t be too successful, and then you’re over rich apparently I don’t know rehabbers you’re gonna make more money get more phase out, so you can hire more employees That’s the rule just to be aware of it in summary bottom line real estates still good making money in real estates still a great Occupation I love my realtor, so I love my rehabbers keep living the American dream. Don’t give up and continue to follow my information I’ll be there for you tailor. You save more taxes build wealth and protect your assets Thanks so much for watching, and if you found that helpful, please look in the description below I’ve got links to my tax and legal library my QuickBooks training videos how to start a small business 50 60 70 videos some as long as 30 minutes explaining more information on tax and legal strategies that will change your life Also, if you’d like to subscribe to my newsletter or check out my social media links, please click here They’re weekly free tips and strategies and articles that you’ll find extremely helpful And I would appreciate it if you subscribe to my channel. I’ve got so many videos here I produce every week on my youtube channel, and I’d love to give you a ping every time I shoot a video Thanks so much and keep living the American dream

9 Comments

Leave a Reply

Your email address will not be published. Required fields are marked *