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...
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.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Join the Largest Real Estate Investing Community
Basic membership is free, forever.