Let's talk about self storage.

For those owners who are incorporated and file 1120s.

Trying to determine how much salary for the Owner/Operator I can expense before declaring dividends. What salary expense have you been able to draw? I realize the size and number of facilities will determine the salary, but I was hoping to get some insight.

Thank you,

Hi Paul,

Even for tax experts that is a loaded question with no easy answer.

The general tax related answer is "it depends".   Your phrasing seems to indicate you prefer receiving wages.  A common response is to find out what a person doing that job would be paid on the open market.  

You should know why you are organized as an 1120 taxpayer.  Most people would not want this for a rental activity, with good reason.

For those owners who are incorporated and file 1120s.

Trying to determine how much salary for the Owner/Operator I can expense before declaring dividends. What salary expense have you been able to draw? I realize the size and number of facilities will determine the salary, but I was hoping to get some insight.

Thank you,

The reason for incorporation would be if I decide to use a Self-directed IRA. It's the "open market" salary expectation that concerns me. I don't want a lot of money I pull out to be reported as dividends.

I'm trying to determine if the double taxation on dividends would be less than the taxes on an IRA withdrawal.

Thank you,

Hi Paul,

Even for tax experts that is a loaded question with no easy answer.

The general tax related answer is "it depends".   Your phrasing seems to indicate you prefer receiving wages.  A common response is to find out what a person doing that job would be paid on the open market.  

You should know why you are organized as an 1120 taxpayer.  Most people would not want this for a rental activity, with good reason.

For those owners who are incorporated and file 1120s.

Trying to determine how much salary for the Owner/Operator I can expense before declaring dividends. What salary expense have you been able to draw? I realize the size and number of facilities will determine the salary, but I was hoping to get some insight.

Thank you,

Often Self Storage can throw off some good tax deductions that would not be currently deductible on an 1120.

Your thought may gain the deduction of an IRA, but you would also gain the income of a W-2 employee.  This seems to be at first blush a wash.  However, a W-2 employee and his employer would also pay employment taxes on this income, making it a net negative.  I don't see how choosing to become an employee is helpful to your situation.  

It is often best for a self-storage generating passive income to be an LLC taxed as an individual or a partnership.  While this would not necessarily create employment income to allow an IRA, it may help you avoid employment taxes.  There are many tax hazards in this discussion that need to be flushed out.  You may want to talk to your tax expert and attorney about your specific situation as it may be different than you have had an opportunity to fully explain.  

The reason for incorporation would be if I decide to use a Self-directed IRA. It's the "open market" salary expectation that concerns me. I don't want a lot of money I pull out to be reported as dividends.

I'm trying to determine if the double taxation on dividends would be less than the taxes on an IRA withdrawal.

Thank you,

Hi Paul,

Even for tax experts that is a loaded question with no easy answer.

The general tax related answer is "it depends".   Your phrasing seems to indicate you prefer receiving wages.  A common response is to find out what a person doing that job would be paid on the open market.  

You should know why you are organized as an 1120 taxpayer.  Most people would not want this for a rental activity, with good reason.

For those owners who are incorporated and file 1120s.

Trying to determine how much salary for the Owner/Operator I can expense before declaring dividends. What salary expense have you been able to draw? I realize the size and number of facilities will determine the salary, but I was hoping to get some insight.

Thank you,

I appreciate the broad answer, but the scope of my question and unknown variable is regarding salary. The Self-directed IRA is a source of financing an expansion, (ROBS) Rollover for Business Startups, which requires incorporation.

I just don't want to pay taxes on dividends at the corporate level and personal level. If I draw $100,000 annually and the IRS comes back and tells me $60,000 is the high end for a storage facility manager, they will reclassify the salary expense to $60,000 and deem the other $40,000 as dividends.

Thank you,

Often Self Storage can throw off some good tax deductions that would not be currently deductible on an 1120.

Your thought may gain the deduction of an IRA, but you would also gain the income of a W-2 employee.  This seems to be at first blush a wash.  However, a W-2 employee and his employer would also pay employment taxes on this income, making it a net negative.  I don't see how choosing to become an employee is helpful to your situation.  

It is often best for a self-storage generating passive income to be an LLC taxed as an individual or a partnership.  While this would not necessarily create employment income to allow an IRA, it may help you avoid employment taxes.  There are many tax hazards in this discussion that need to be flushed out.  You may want to talk to your tax expert and attorney about your specific situation as it may be different than you have had an opportunity to fully explain.  

The reason for incorporation would be if I decide to use a Self-directed IRA. It's the "open market" salary expectation that concerns me. I don't want a lot of money I pull out to be reported as dividends.

I'm trying to determine if the double taxation on dividends would be less than the taxes on an IRA withdrawal.

Thank you,

Hi Paul,

Even for tax experts that is a loaded question with no easy answer.

The general tax related answer is "it depends".   Your phrasing seems to indicate you prefer receiving wages.  A common response is to find out what a person doing that job would be paid on the open market.  

You should know why you are organized as an 1120 taxpayer.  Most people would not want this for a rental activity, with good reason.

For those owners who are incorporated and file 1120s.

Trying to determine how much salary for the Owner/Operator I can expense before declaring dividends. What salary expense have you been able to draw? I realize the size and number of facilities will determine the salary, but I was hoping to get some insight.

Thank you,