I've been looking for a rental property for 12+ months and think I've finally found a great property. I'm self employed and trying to navigate my options to maximize tax deductions and protect my assets.
As my main source of income, I do IT consulting through a single member LLC. I'm considering filing as an S-Corp for the SE tax savings. A salary of $90k should save me $4,360.50 in taxes (.153 * (118,000 - 90,000)). The reasonable salary is difficult to assess. If I was a full time employee, $90k would be a reasonable salary. However, since I'm a consultant, I'm able to charge a much higher rate. Is it still reasonable to claim a salary of $90k?
The rental property will be purchased by the LLC with cash at $55,000 assuming another $20,000 in repairs. The cash will come from an HLOC to give flexibility. After the repairs are done, I'll take a mortgage out on the property to pay off the HLOC.
Taxing savings will include: Deduction of $20k in repairs to get it ready to rent, $4.3k to S Corp filing, Interest on loan, Cost to close
I'd really like to do this myself. Not so much to avoid the cost of a CPA. I just like learning how to do this so I can re-use it down the road.
What am I missing here? I'm sure a lot. I've done quite a bit of research and this is where I'm at. Hoping to get some pointed feedback so I can go back to the drawing board and finalize my strategy.
