Keeping money in my pocket vs. paying the tax man

[Neal Collins]

Is there any way to avoid paying personal income tax when flipping a house?

Could you hold it for longer than 365 days and only be subject to longterm capital gains tax?

Alternatively, could you fix it up and call it your temporary residence and then buy a place of equal or greater value?

Is there any difference between putting the property in your personal name vs. a business entity's name?

Thanks in advance!

[Jon Holdman]

How long you hold it is irrelevant.  Intent is what counts.  If you buy it with the intent of fix and flipping it the profits are ordinary income, subject to income tax and SET.  Capital gains taxes never come into play.

If you live in it for two of the five years before you sell you can exclude gains up to $250K for a single taxpayer, $500K for married filing jointly.  But as a residence many things you might spend for a fix and flip would not add to your basis, so your gain would be higher.

Personal name or most entities won't make a difference.  What might is to use an s-corp.  If you have enough income from these deals, using an s-corp would allow you to distribute some of the profits as salary (subject to SET) and some as distributions (not subject to SET).

But bottom line is fix and flipping is a business and you're taxed just like a shoe store or other business.