Definition
Self-employment income from real estate activities (rental, flipping, wholesaling) reported on 1099 or Schedule C, subject to self-employment tax.
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Rental income is typically reported on Schedule E (not self-employment subject), while wholesaling/flipping is Schedule C (self-employment taxable). Self-employment tax of 15.3% applies to 1099 income. Understanding income classification affects tax planning.
Pro Tip
Understand income classification (rental vs. self-employment); structure activities to minimize self-employment tax.
Example
Wholesaling income of $50,000 requires 15.3% self-employment tax ($7,650) vs. rental income without self-employment tax