Capital Gains vs Self Employment Tax Rates

[blackhouse]

Arkansas What is the name of your state? Arkansas

Good day, and hope you all had a great Memorial Day!. Just found this site. Looking for info regarding the Capital gains tax rates and Self employment tax rates. Bought a house in August of 2004 have been renovating it. Have done the work of a general contractor, but have not paid myself (yet). Would it be better to pay myself or take the profits from the sale. House and land cost $10,100.00 extra lot $100.00, approximately $33,000 of improvements. Total investment approx $43,200.00 estimate to sell at $75,000.00 realizing a difference of $31,800.00

Which would be best, sell the house and be subject to capital gains on $31,800. or bill out a contractors fee for 10 to 11 months work in the amount of about $30,000. Thank you for your reply. Oh, I do not currently live in the house. thanks again.

 

[Snipes5]

Are you a contractor who is in the business of buying houses, fixing them up, and selling them?

If so, you are self-employed. If not, you have a hobby.

Take your info to a competent Enrolled Agent and let them help you decide.

Since you are doing a job for your own gain, and not for anyone else's, ie fixing up a house for joe schmoe who then sells it, I would just pay on the capital gains, and not take it as employment.

The Self Employment + income taxes far exceed the capital gains rates anyway.

Snipes

 

[blackhouse]

Enrolled Agent?

Snipes,
Thanks for the reply. No I do not have a business set up. I'm just doing this for myself, hobby I guess. SAW AN OPPORTUNITY TO TURN A BUCK AND COULDN'T PASS IT UP! What is an Enrolled Agent? Thanks again for your input. Carla OH, another question, how much of a tax hickie do you think I will have to take, what percent? Or where can this info be found, the Enrolled Agent?

 

[Snipes5]

To find an Enrolled Agent in your state, go to www.naea.org, and search by state.

An Enrolled Agent is someone who is certified by the IRS to represent you in a tax proceeding. (It means we know a lot of tax stuff).

Your tax hit will be 15% of whatever the "gain" is on the sale. According to your post, that would be 15% of 31.8K. So that's $4770.

Snipes