Ny State Tax Question...
For rental income in new york, is it taxed at gross or after expenses? Let say, i collect 1000 rental income am i taxed at the 1000 dollars or am i taxed after i deduct all my other expenses? I am asking to see which is better to set up an llc in ny or nevada or have an comapny in ny, and a holding company in nv. Any information on this subject matter is greatly appreciated. Thank you.
This is knowledge that applies to everywhere in the US:
Any business goes like this: income - expenses = taxable income
single member LLC's are considered a disregarded entity for tax purposes thus allowing you to report passive income (rentals) on a schedule E
If you are doing an active trade or business (such as wholesaling or rehab) you would be subject to 15.3% self employment tax. For this reason and purpose I recommend an S-Corp.
From what I understand as a general rule if any of the following apply you must pay taxes in your state:
1. own real property
2. employ people
3. there's another i can't remember
So a Nevada LLC owning rental properties in New York would have to pay NY tax and the additional cost of NY allowing you to do business in the state.
However, a Nevada LLC that holds notes/mortgages only, it may qualify since it doesn't fit the requirements of paying tax.
This is all from a tax standpoint only. I am not an accountant so please seek competent legal advice.
just for clarification there is no sales tax on rental properties? ie: i know that when you stay at a hotel they charge you occupancy tax. How does that work? I just want to make sure there is no concept of sales tax on rental properties.