How to Calculate taxes

Question

We successfully flipped a house and had it for 2 years. How do we determine how much money to put aside for taxes?

Michael Lynch · Answer

No one can really give a good answer until they know everything you did with this property. You have mentioned that it was a house hack, you also called it a flip, and you have also indicated it was your primary residence.

More details are needed. Is the property a single family home or multi-unit? Was the property a rental and then your home? Part rental, part home? When did you last avail yourself of the primary residence gain exclusion? This all matters.

Dave Spooner · Answer

@Eric Doe Got it. It's pretty hard to say because so much is dependent on the kind of work you did and how you classify it. Are you wondering how much to set aside for taxes in the event of a sale? Have you occupied the property at any time? Do you intend to do a 1031 Exchange?

Dave Spooner · Answer

@Eric Doe I can't recommend enough hiring a CPA. They will save you far more money than they cost you. They will also save you tremendous time.

That being said, it's still worthwhile familiarizing yourself with the tax code. NOLO put out a great book covering tax:

https://store.nolo.com/product...

Michael Plaks · Answer

@Eric Doe

You "short stories" are not helpful, and they change as you tell them. Give us the long story. :)

When did you buy it, exact date? When did you move in, exact date? Did you have any tenants? If yes, the exact dates and what exactly did they rent? Anybody besides you lived there, ever? When did you move out, exact date? When did you sell, exact date? If the last two dates are not the same, what was going on with the property between you moving out and the sale? What was the purchase price, the rehab cost, and the sale price?

Eric Doe · Answer

@Ryan Thomson yes we lived in the house for over 2 years

Ryan Thomson · Answer

@Eric Doe Completely agree with @Dave Spooner a CPA is worth every penny. Have you considered a 1031 to postpone the taxes?

As far as calculating - did you live it for the last 2 years as you flipped it. Because that would help you avoid the taxes completely.

Eric Doe · Answer

@Michael Lynch I was under the impression of a house hack being a single family as well as a multi. Just read the term and seen it just applies to multi family. Long story short, we lived in this single family property for more then 2 year, as we lived in it we renovated it, gained equity then sold.

Eric Doe · Answer

@Basit Siddiqi it was my primary residence for over 2 years. Would this mean I could possibly be expept?

Basit Siddiqi · Answer

@Eric DoeSale of Capital AssetFederal taxes - 0%, 15% or 20%. There is also a potential 3.8% Net Investment Income TaxState Taxes - Dependent on stateSale of Real estate that is considered InventoryFederal Taxes - up to 37%State Taxes - Dependent on stateSelf-Employment taxes - up to 15.3%If it was a personal residence prior to sale, some or all of the tax from gain may be excluded.

Eric Doe · Answer

@Ashish Acharya we definitely will do that.

How to Calculate taxes

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