For those of you that fix and flip and turn tidy profits from each sale - how do you deal with taxes? Are you using 1031's for each sale? If not, don't you get killed on taxes? I sold one of my buy and hold properties because I (thought I might) need the money and just got nailed by Uncle Sam... Now that I'm writing this, I realize that having an LLC would probably help but I already have a corp for my "day job - film production" and the thought of having two corps is more headache than I can convince my wife or myself to deal with. But maybe we should if we are going to continue to invest... sigh...
3235734166 | http://www.tomcamarda.net
Most flips aren't eligible for 1031 exchanges. If anything income from flips is taxed at a higher rate than rental income. Money earned from flipping houses is considered to be income from self-employment and is taxed accordingly
I don't think an LLC would offer much of a tax advantage, unfortunately (I could be wrong about this). My understanding is that an LLC is merely a pass-through entity as far as taxes are concerned.
Making big bucks by flipping houses and not expecting to pay higher taxes is not a realistic attitude. No one like taxes and we all try to minimize them but they are a reality.
Flipping houses is basically ordinary income and offers no tax advantages. Owning rentals does offer some tax advantages.
Ned Carey, Crab Properties LLC | http://baltimorerealestateinvestingblog.com/
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