I bought a home in June 2017, I just sold it and am set to close nov 28th if all goes smooth. It was a home to flip and not my residence. Do I have to pay taxes on my prophet ? Or can I use the money to roll into another property ? I do not want a 1031 or what ever it is called, it sounds like it costs money to do that and the money is held.
@Charles France , A 1031 is only available for property you intended to hold for productive use. So that wouldn't work any way. But you may want to look into it further for the future. On this one get ready for the tax man. Ordinary income, self employment, Fed and State.
As Dave has mentioned - Expect to pay fed, state and self employment tax.
How much profit did you make?
Do you plan to do more flips in the future?
Wait, ok I get the fed and state but why self employment tax ? Yes I for sure am going to do more. I plan to do many many more.
I am learning as I go, wish and hope for some great knowledge and advice. I do all the repairs and remodeling myself to save $ on labor but wow that was the hardest thing to do. I want to get to the point I can hire people. Labor just eats so much $
@Charles France - Sorry for the delay. I didn't notice you responded.
Flipping in the eyes of the IRS is that you are a dealer of real estate where real estate is your inventory.
This is considered ordinary income and is subject to self-employment tax.
Self-employment tax is 15.3%(6.2% for social security and 1.45 for medicare; employer pays 1/2 and employee pays 1/2. Since you are both empoyer and employee; you would have to pay both). There is room for saving on self-employment tax if you operate through an S-corp.
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