What are the relevant taxes investors should be aware of?

HoneyBricks covers taxes for the investing entity, with individual investors responsible for their individual taxes. Tax forms are automatically generated during the account verification process.

If you are an investor on the HoneyBricks platform, your investment legally represents a membership interest in a real estate limited liability company (LLC).

The LLCs are treated as partnerships for US tax purposes, and HoneyBricks pays all corporate, federal and state taxes for the entity, before taxable activity earned by the partnership is allocated to all of the individual members (partners) based on ownership percentage.

HoneyBricks manages and distributes Schedule K-1s for investors, and some investors may fall below the IRS minimum for filing (which varies according to age and filing status of the investor).

What documents will you receive?

As a HoneyBricks investor, you will receive:

  • Schedule K1s for each investment made on the platform
  • A Tax Summary that aggregates all of an investors tax information US Federal Income Taxes

You’ll be notified by email once available, and the documents will also be added to your account settings in the documents section.

US Investors

US investors are generally required to directly report their allocable share of the LLC’s tax items including income, gain, profit, loss, and deductions directly on their U.S. federal income tax returns each year.

A W9 Form is automatically generated for you during the account verification process.

Non-US Investors

An SSN or ITIN is required for all investors on the HoneyBricks platform.  

  • U.S. citizens, permanent residents and eligible non-immigrant workers in the United States are eligible for an SSN and you can learn about the process here.
  • Investors not in this category will need to obtain an ITIN by completing IRS Form W-7, IRS Application for Individual Taxpayer Identification Number. You can learn about the process here

Non-US investors are subject to withholding taxes, generally required to be collected by HoneyBricks from your share of net income and capital gains from the sale of the project. If you are a US tax-resident, there is no withholding tax. 

The percentage withheld for non-US investors is influenced by tax treaties that your country may have with the US. By filing a US Tax return, investors may be able to claim the tax already withheld to avoid double taxation of the income.

A Form W-8BEN will automatically be generated for you during the account verification process which requires an SSN or ITIN.

State Income Taxes

The requirement to file state income tax returns varies widely, depending on the investor’s state of residence and/or the state where the LLC’s property is located.

For example, many US states:

  • Have no state income taxes (i.e. Washington, Texas),
  • Allow LLCs to file on behalf of members through composite returns (i.e. Utah), and/or
  • Have minimum thresholds that determine if investors are required to complete a state tax filing.

Please consult with a tax professional on your particular situation.

Many investments on the HoneyBricks platform do not require state income taxes to be filed by individuals due to no state income taxes (e.g. Texas, Utah, Washington)

Investing through other entities

Investments from IRAs, pension plans, charitable trusts or organizations, private foundations, or other similar tax-exempt entities are typically exempt from U.S. federal income taxation on most types of income or gains derived from investments.

Investments by such entities in real estate projects—particularly if the projects involve debt financing—can sometimes give rise to taxable income or other adverse tax issues, depending on the type of investment or investor involved.