So today I was outside sanding and prepping those barn shelves for the master bedroom and there was this black hornet out there and he was hell-bent on stinging me. I had a can of wasp spray and used almost the entire can and he’s still alive right now as I type. I’ve never done something so annoying and couldn’t figure out how this hornet didn’t have something better to do. I managed to get the wood completed, dodging this hornet and then went in and made myself a coffee and went back out with the intentions of killing this pesky biter. As I sipped my coffee, dreamed of how me and Matt can’t wait to get the keys to the home I remembered that I saw my accountant in the morning as I made an appointment to ask about tax consequences but before I delve into that subject let me just tell you that like I said in a previous post…anything you think that will go wrong WILL. I sent my earnest money to the title agency using certified mail with tracking number…..so I’ll go track and see where it’s at! I’m back, it’s to be delivered by 8 p.m. this evening. Tell me why I paid $ 5.95 to send something certified when I could have put a stamp and they would already have had it!
So back to my post. I wanted to confirm with my accountant what my tax consequences would be and if I should get an S Corporation to escape some of the 15.3 percent SE tax but there is no way around the fact if you buy a home, quickly renovate it, list it and sell it and don’t hold it for the full year as a rental or intent to rent….that your profit will be taxed as ordinary income…that’s right people, ordinary income so lets just say I profit $ 30,000 on this sale, I have to add that to my other income having it cause me to pay the IRS $ 10,000, $ 1,700 in state taxes and $ 300 in locals in taxes and as if that isn’t enough I also have to pay the 15.3 percent Self-Employment income at another $ 4,590 so our legislators and congressman can get huge raises. I found the home, I figured out that it’s profitable, we took care of everything and we also risked our money to buy it but the government wants more than 1/2 of my cut and work. Ridiculous but my accountant said as long as you are paying taxes you made something and laughed and laughed about the IRS wanting 1/2 of a person’s income. It’s wrong on so many levels but the alternative is to hold it out as a rental for a year and have all those expenses which would total $ 5,000 so either way………… Uncle Sam makes more than me……Sad.