Question about capital gains when flipping
Hello everyone!
I'm new to the site and have found it very helpful. I'm also interested in REI and am leaning more towards flipping. I have a couple of questions regarding tax purposes. It's to my understanding that capital gain is taxed if you make a profit on a property that you sell without living in it for a certain period of time. As a flipper, is there a way to avoid it or reduce the percentage? Should one do taxes as a business instead of an individual to help this?
Most Popular Reply
You pay capital gains whenever you sell any property for a gain.
If it's your primary residence, and you lived in it for 2 of the last 5 years, you can claim an exemption of $250,000 in gains for single people, $500,000 for married people.
If you hold the property for long term rental, and it's not a primary residence, then you pay capital gains.
If you hold a property for a flip, you pay taxes as normal income based on your tax bracket and subject to self-employment taxes.
There are ways to minimize taxes, but you can't avoid them. you would need to speak to a CPA to discuss how to minimize the tax impact for any of the above situations since everyone's situation is slightly different depending on a range of factors.