When "flipping" a house what are the tax consequences?

Question

What can be written off and how does it affect personal income tax. Also is capital gains involved?

Answer 1

Assuming you own it less than a year, your gain will be treated as normal income, subject to the highest rates you'd pay.

You write off all your closing costs, capital improvements, and selling costs against the cost basis, to reduce the profit spread on your taxes.

You should definitely see a tax advisor to make sure you do it right.

Answer 2

1. You are flipping and if you are doing it correctly you never own the real estate.

2. All your deals will be short term deals. Nothing where you hold property for income purposes for more than 12 months. Capital gains will not apply. You are likely to be classified as a dealer in terms of the IRS code so the property if you did own them are inventory.

3. You can write off the normal business expenses (mileage, materials, etc). Nothing that special so pretty easy to figure out.

Flipping is like a job. You make money when you complete a deal and then you start all over again when you do your next deal. Ordinary income closer to commissions than anything else. Good income but nothing special in terms of tax deductions.

Answer 3

You can write off the expenses for fixing up the house, you have to claim a capital gain tax when you sell the house, this is due to selling the house after purchasing it less than 2 years ago

Answer 4

In a flip situation you can deduct any expenses that arose in connection with the home. If you hold only a few months you will get taxed as regular income only rate. You will not have capital gains until held greater than 2 years in real estate

Answer 5

The key points to answer here are how long have you owned the property, and was it your principle residence. IF you have owned it for more than 2 years and can say you lived there, it is tax exempt. If not then any gain is subject to a 25% capital gain tax. Gain is computed by subtracting the cost of the property plus any improvements and any selling costs from the sales price.

Sales Price
-Initial Cost
-Improvements
-Selling Costs
----------------------
= Gain

Answer 6

Yes. It would be a capital gain. You pay capital gains tax on the profit.

If you hold it less than a year - short-term.
More than a year - long-term

Answer 7

Yes you can write off your expenses, if you have income. You must live in the house two years or you pay tax on the gain.

Answer 8

Hirebookeeper is right. You don't have to pay capital gains if you live in it for 2 years.

Answer 9

Well anytime you make a profit, there is a capital gains issue. However, when you but the house I think you can deduct the mortgage interest paid while you owned it.