If real estate investing, (pre-foreclosure flipping) is my primary source of income, and I have an LLC, what tax implications do I have? Are my business expenses deductible, inlcuding items like cell phone, mileage on car, etc. ? Thanks in advance.
The Shadow Knows. Isn’t that some famous saying somewhere?
Yes your expenses will be deductible as business expenses of the LLC and even as a sole proprietorship. You can deduct more I believe like life insurance of key employees and members of the LLC as well as health etc. Please check with a CPA about this as I am not giving you tax advice only what I have read and learned perhaps even in error.
Yes that is how the expression goes.
Thanks for the advice, I am keeping track of everything right now and will have to consult with cpa soon. I appreciate the advice.
I had once heard that you needed a C-Corp to expense life insurance for key employees.
Business expenses are deductible. If your car is shared between your personal use and your business use, keep track of your business mileage. Only your business use is deductible. Same with your cell phone – if the phone is for both personal and business use, you can only deduct the prorata share allocated to the business use.
Remember that property flipping is an active income business. As such, all your sale profit is taxable in full in the year of the sale, installment sale tax treatment is not allowed even if seller financing is used to facilitate the sale, no depreciation is allowed, and the flip property is not eligible to participate in a 1031 exchange.
Your income is ordinary income to your business, and self-employment income taxes would also apply. Be sure to ask your CPA about this when discussing the business entity that best fits your business.