My wife and I file jointly and our gross income from both of our full time W-2 jobs combined will be roughly $80,000. That will put us in the 12% Fed tax bracket. However we bought an investment property, rehabbed it, and sold it for a profit within 5 months. Since it was a short term investment we have to pay capital gains at our normal income bracket on the profit. After all expenses and holding costs were deducted, we had a total profit of roughly $60,000. We also have another investment property we bought 4 months ago, we are in the process of rehabbing and plan to sell before year end. We expect to make around the same profit of $60,000 on that flip as well. With that in mind I have a few questions about our taxes for this year.
1. Will our tax bracket be increased to the next tear at 22% due to the sale of the investment properties? Our total income would be around $200,000 gross if the second flip house sells for a $60,000 profit. ($80k+$60k+$60k)
2. If so, will that also increase the amount we needed to withhold from our W-2 income? Since we had been in the 12% tax bracket we had our employers withhold only enough to cover the 12% taxes that would be due. However, now we are being moved up to a 22% bracket there is an increase of 10% that wasn’t withheld. Should we expect an additional 10% to be taxed on our $80,000 W-2 income when we file our taxes? (About $8,000)
