Hello Everyone. I have been blessed over this last year in my rehab business now I need some tax advise from others on BP so that we don't bless the tax man so much :) I have been rehabbing homes since last summer and though have only done seven flips, I will have made a net profit of almost $275,000. I plan on building up my business to having 4 or 5 a month so hope that the profits will continue. My questions for those that have been in this business for quite some time now is should I pay the capital gains on my profits as I go or should I look into the 1031 tax exchange? I will be looking for a good accountant but want the advice from the professionals here on BP. Thanks to everyone in advance.
Sorry but flipping, even if you held them for a year, doesn't qualify for cap gains or a 1031. It's ordinary income with the associated FICA/self employment taxes.
Thanks Wayne for the disappointing information :( I guess the tax man always gets paid. I will continue then to help pay off the national deficit :)
@Jerry Rodgers now that was funny, pay the national debt. Unfortunately whatever amount you end up paying was probably spent 5 years ago!
So I guess my new plan, William, will be to make as little as possible so the government won't spend as much :).....isn't that how if works?...lol
@Jerry Rodgers Congratulations on the profits. That is very encouraging! I started about the same time as you...Fall of 2013...and I am into my 4th flip now...hopefully will end up netting a sum of around $120k across the 4 flips if all goes well...so I am very interested in this conversation as well...
ok never mind... I googled some more and found this article. Explains why flipping would not qualify for a 1031. Thanks.
A flip is not considered an "investment" property. It's a business, and considered inventory.
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