I need help on how to pay off my credit card debt, be ready to buy a house in the upcoming year, and deal with my massive student loan debt

General
1

Here’s a summary of my situation:

  • Age and Debt: I’m 26 and about four years out of college. I have approximately $150,000 in private student loans and an additional $30,000 in federal loans. I also have $22,000 in credit card debt, though I’ve reduced it by a few thousand this summer.

  • Income and Career: I’ve been flipping cars since college and have a real estate license. I earn well from 1099 work with asset management companies, where more work means more pay. This entrepreneurial mindset has driven me to seek various income streams and investments. I aim to generate substantial income to eventually invest in businesses or passive ventures. While this drive has fueled my success, it’s also contributed to my current debt situation.

  • Current Job and Earnings: About a year ago, I started a 9-5 job, aiming for remote work to balance my other hustles. I’ve been with this company for six months, earning around $4,000 a month after taxes and benefits. My real estate work brings in $4,000 to $6,000 monthly, and flipping cars adds $1,000 to $2,000. On good months, I take home $10,000 to $13,000. Taxes are not an issue for the car income, but the real estate income will be.

  • Expenses: My rent is $1,550 a month. Credit card minimum payments are about $1,000. I also pay $1,000 monthly to my online MBA program to avoid full student loan payments, which would be around $2,000 a month. Car insurance and other expenses total approximately $600-$700 a month.

  • Buying a Duplex: I’m interested in buying a duplex next summer in a gentrifying area of North Philly. I see this as a valuable long-term investment. However, my current debt will make it challenging to get approved for a $500,000 to $600,000 property. I plan to use my car flipping profits to clear my credit card debt in 8-10 months, but student loan payments will impact my buying power.

  • Tax Filing Issues: I haven’t filed taxes for 2022 or 2023. In 2022, I earned about $74,000 in 1099 income, hoping to write off most of it to avoid a large tax bill. In 2023, I made $30,000 to $40,000 in 1099 income and $20,000 on a W-2. For 2024, I estimate $45,000 to $55,000 in 1099 income and $60,000 from my salary.
    Questions:

  1. Can I structure my taxes to reflect my income without facing a massive tax bill?
  2. Is it possible to write off most of my 2022 income and show more for 2023 and 2024 to improve my loan application?
  3. What should I expect for a realistic tax bill and what are the payment plan options?
    Advice Sought:
    I’m looking for general life advice on improving my situation. What would you do in my position? What am I doing right, what could I improve, and what changes will help me advance to the next level?
2

First and foremost, you need to get your taxes filed and paid. It’s a normal part of being an adult, not something to be avoided. Also, if you’re not reporting the income from flipping cars, be aware that any large deposits or withdrawals will need to be explained when you’re applying for a mortgage.

Regarding deductions, it all depends on your expenses. You can’t usually write off your way to avoiding taxes entirely; deductions only lower your taxable income.

What you’re doing right: You’re gaining valuable skills that can generate income.
What you’re doing wrong: You’re not paying taxes and financing your education at a level that’s comparable to buying a home. You also have too much credit card debt and are relying heavily on unsecured debt, which is risky. Consider hiring a CPA to sort out your taxes and focus on buying a house only when you have a clearer financial picture.

3

In the upcoming year, you have no business attempting to purchase anything. Take that time to tidy up this mess. You’ll be grateful later.

4

Really? I have visited that place. However, it took my spouse and I five years to pay off all of our debt. We now have a paid-for house and are 44 and 51 years old. We are able to travel, invest, and engage in any activity we choose. We still budget and save money for things like retirement even though we don’t have any debt.

5

You most certainly need an accountant to help you sort out your taxes. Once that is resolved, visit a home lender to determine your financing eligibility. Even if you haven’t finished your education, the IRS will take into account any payments you make and add them to your debt to income (DTI).

Purchasing a duplex or multiunit is wise, in my opinion, but there is a lot of cleanup ahead of time.
Continue without giving up. Make small, gradual progress. Before you can even begin to grasp whether you can acquire a mortgage, you need to know what your tax due is. Work on the credit debt in addition to starting there.

6

Yes, it will be challenging to locate a lender who values your spirit of entrepreneurship. For monthly pay, they desire consistent W-2 employment.

Additionally, with so many things you are behind on, buying a house is still far off for you.

7

Government-related expenses are non-negotiable and must always be paid; they never go to collections. Get on a repayment plan if you aren’t already; there is a lot of interest, so pay it off as soon as possible. You may have completed BK if they weren’t tied to the IRS and government debts. I did it on a car loan years ago along with credit card debt and medical bills, so if it’s okay with you, BK, you might be able to do the same for your private loan.