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Law Educator, Esq.
Law Educator, Esq., Lawyer
Category: Family Law
Satisfied Customers: 92754
Experience:  Experienced attorney: Family law, Estate Law, SS Law etc.
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Self-Employed Taxes - Paul, after everything in the past

Resolved Question:

Self-Employed Taxes -
Paul, after everything in the past happened I lost my corporate job and have found finding new employment difficult. Obviously. So I am self-employed making money renting out my house and planning on purchasing a couple other homes and then renting those out. I know that in general when someone is self-employed that they pay "their" portion and their employers portion of social security which can equal around 13%. My brother told me that you do not need to do that on rental income. Does that sound correct to you?
Submitted: 1 year ago.
Category: Family Law
Expert:  Law Educator, Esq. replied 1 year ago.
Thank you for your new question. I look forward to working with you again.

Your brother is correct, since renting houses is passive income, not employment income. However, to build up SS, many people will do the rentals as a business and form an LLC and rent through the LLC and take a salary and pay their SS and unemployment taxes because in the event something happens and they lose the houses they can collect unemployment and the money to SS increases your benefit amounts.



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Customer: replied 1 year ago.

Paul,


If I sent up an LLC (which I plan to) and I take an income through that do I have to pay the SS taxes. Everything is so tight now, even though I wouldn't mind building up my SS or unemployment that 13% makes a big difference in my budget right now.

Expert:  Law Educator, Esq. replied 1 year ago.
Thank you for your follow up.

If you set up the LLC and make any income from salary, yes you have to pay the 13%. However, while I know things are tight, I also get customers here daily in the same boat as you complaining as to why their SS and medicare is so low or why they cannot get unemployment and the answer is because they chose to save money because things were tight and take a bonus from their LLC instead of salary and paying the taxes.

You can make the choice which way to go with it, but you need to look to the future when you cannot work anymore and how much more paying into SS now will give you then.
Customer: replied 1 year ago.

Paul,


That is very fair and wise. So are you saying that I could possibly do some combination of salary and pay the 13% and bonus and not pay the 13%? Thanks.

Expert:  Law Educator, Esq. replied 1 year ago.
Absolutely, you can take some salary (I suggest if possible just enough to get you the maximum unemployment benefit if you lose work for any reason) and pay the 13% on that and then take the rest in shareholder distribution/bonus and avoid the 13% on the remainder.
Law Educator, Esq., Lawyer
Category: Family Law
Satisfied Customers: 92754
Experience: Experienced attorney: Family law, Estate Law, SS Law etc.
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Law Educator, Esq.
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Experienced attorney: Family law, Estate Law, SS Law etc.