Question: 1031 Exchange
I am aware that in order to do a 1031 exchange I would have to buy a property of same value or more or more than one properties which total the price of the relinquished property. My question is: In doing a 1031 exchange, am I able to break down the price of the relinquished property (eg: $250,000) into several down payment amounts for several new homes (eg: buying 10 homes with downpayments of $20-$40K each)? Can you do an exchange this way? Or does it only work to exchange based on the selling price? Eg: Sell a $250K home for two $125K homes, etc? Thanks!
LLCs are not tax specific. They are further organized as a pass-through entity, corporatation or partnership. That where the different tax strategies come into effect.
The LLC does have several advantages. Gains from the LLC can be disproportionalty distributed meaning that if you own half and the other partner owns half, you can get the partner to take 30% of the profit for ponying up the cash and you can take 70% for doing the work as an example. The LLC also provides liability protection. If someone sues the LLC, the plaintiff must "piecre the corporate veil" in order to take your personnal assets. LLC are good for rentals because the property can be titled in and out of the LLC without a taxable event occuring.
The LLC provides no privacy. The officers and managing partners are public record and most states allow for a free, online search of who owns certain businesses.
Thanks to everyone for sharing your wisdom.
Self employment income taxes have two components -- social security and medicare. The social security tax rate is 12.4% on the first $90K of income and zero thereafter. The medicare tax rate is 2.9% on all income earned.
If you have other W-2 income subject to social security withholdings, then only the amount of self employment income needed to raise your total income to $90K is subject to social security tax.
Thanks for the info! Also after those two taxes are taken out is the rest still taxed at your tax bracket, say if your in the 33% tax bracket would the remaining after being taxed on Social Security and Medicare be taxed at 33%???
-Sly
Consider what happens when you work for someone else as a W-2 employee. Your gross salary is $40K per year but, after withholdings, your take-home is only $25K. Your personal income taxes are based upon your gross salary income of $40K, while your employer withholds your social security and medicare taxes from your pay. The social security and medicare taxes are also based upon your gross salary.
Self-employment income works the same way. If you are acting as a sole proprietor, ordinary income taxes and your "withholdings" are both calculated on your total self-employment income.
If you are in the 25% tax bracket, then your ordinary income tax is 25% of your self-employment income AND your total self-employment income tax is 15.3% of your self-employment income. Of course, social security withholding is subject to the $90K income cap I mentioned earlier.
SE tax is 15.3% (12.4% social security, 2.9% medicare) when you work for someone else each one pays 1/2 or 7.65%, when you are self-employed you get to pay both sides. EB
Ebellis
Thank you for giving the correct numbers.