Taxes for a flip- General Question
I will be using a CPA moving forward, but I'm really stuck on something that should be simple to know. I know about short term capital gains taxes, but also know about the self employment tax. My question is this:
When flipping a home (with my LLC if that matters) do I have to pay BOTH the short term capital gains and the self-employment tax. Or do I only have to pay one of them? This is the part that I am confused about. If it's both then I would be paying around 45% of my profit in taxes which would definitely push me to continue BRRRRing as opposed to flipping. I have two homes under construction. I have only BRRRRd but I am interested in actually flipping one of them, but need this tax info to run the numbers.
Most Popular Reply
No, flips aren't capital assets, so you don't pay capital gains (short or long-term).
The income will most likely be taxed as ordinary income at your marginal tax rate, plus you're likely to be on the hook for self-employment tax for some/all of the income as well, depending on how you've structured the LLC.
Long story short, flipping is *not* a good way to shelter taxes.