If I flip a house in 3 monthes how much IRS tax do I have to pay?

Question

Any suggestions or ideas? I want to get rid of it in 3 monthes.
I am in CA

THANKS

Answer 1

If you flip a house in 3 months, you will owe ordinary income tax on all gain. The gain is figured by taking the selling price minus:

Purchase price
Cost of all improvements (if any)
Your costs to purchase the home (look at your HUD form)
Your costs to sell the home (look at your HUD form plus anything you paid for advertising, Realtor, etc.)

Keep good records of all expenses! The gain is entered on Schedule D as short-term gain. I'm a little hazy on what to do if it is a loss. One side of me says it is personal property and you can't take a loss. The other side of me says is was strictly business therefore you can take the loss. Check with a tax person if you have a loss. I'm also not sure whether you need to enter the sale on a 4797 "Sale of Business Property". I found a pretty good link explaining some issues (below). You really should get an accountant or tax professional to be totally in the clear.

Answer 2

More than if you wait a year. I'm not an accountant and that is the person you should ask.

But for my two cents worth. If you hold it less than 1 year you pay a higher capital gains rate than if you hold it for a year and a day.

The bottom line is you will pay a certain rate on the dollar amount above your purchase price.

If you hold it for two years and it is your primary residence you will owe 0 capital gains. Assuming your gain is 250K or less if single and 500K or less if married. And you could in theory do that every two years with a different house.

Unfortunately, it may be difficult to keep that going as home appreciation has to level off, at least at some point.

The other thing to know is there are more costs to "flipping" a home than federal taxes.

State taxes to sell. Realtor commissions.

Answer 3

Are you going to keep flipping? You might wish to consider a 1031 exchange. In that case definitely get a CPA involved, who can then point you to someone who can handle the 1031 exchange. There are strict time limits for completing the exchange so, ideally, you would wish to have the other property lined up just before you sell.

TaxMan wonders about losses and Form 4797. At our office we put those sales on form 4797, which is what the IRS expects. That, by definition, makes it business property, so the loss is deductible at the rate of $3,000 per year until extinguished. Having said that, we have never had to report a loss for any client in this situation.

Answer 4

You do not qualify to have a personal residence exclusion since you have only owned the house for three months (whether it is your personal residence or not). The gain is going to be taxed at your marginal rate (The same as your ordinary W-2 income) since you do not qualify for capital gains rates by not holding the property at least one year. If you are fixing up the house track all of the expenses to fix the house and add them to the basis. More details and numbers would make it easier to give you a more exact answer regarding how much gain would be involved.

Answer 5

If the house was your home and you have lived in it for at least two years, then you may exclude up to $250,000 profit and the rest is taxed as capital gain.

If this is streaky a flip, and you have not own it for very long, then the profit is tax at the rate as the rest of your income.

For more information about selling of properties, consult IRS Publication 17. http://www.irs.gov/publications/p17/ch14.html#d0e35819

Best wishes.

Answer 6

That's a question for your tax accountant but here's a site that will should help, http://www.1031x.com/tax_calculator.cfm.

Answer 7

it depends on the selling price.

Answer 8

http://www.ftb.ca.gov/forms/index.html
just search here...