Capital gains tax-flipping a house

4 Replies

This may be a dumb question but I am just getting started and trying to figure out all of my potential costs before I invest.

Do you have to pay the normal capital gains tax on a property when you sell it for a profit if you are re-investing that money into another property?

Thanks to anyone who can help :)

Flipping profits are taxed as ordinary income, including SS/Med, and not deferred by reinvesting.

Originally posted by @Erika Koenigsknecht :
This may be a dumb question but I am just getting started and trying to figure out all of my potential costs before I invest.
Do you have to pay the normal capital gains tax on a property when you sell it for a profit if you are re-investing that money into another property?
Thanks to anyone who can help :)

If only you could be so lucky. As @Wayne Brooks points out it is just as if you are selling any other product all or almost all of the normal tax advantages of RE investing are not allowed. No 1031, no depreciation on the property, treated as ordinary income instead of capital gains, and you have to pay both side of social security and medicare taxes.

There are ways to mitigate some of this and as @Rolanda Eldridge points out a good RE knowledgeable CPA would be able to help you. But make absolutely sure they know RE tax rules, I've found most don't. At least not to the level I need them to know it.

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