Fix & Flip Capital Gains

[Danny Day]

Can someone point me in the right direction (or refer me to an article) on how much I should expect to hold for capital gains tax for fix & flip deals?

I am in the process of forming my LLC right now, and will be purchasing houses under the LLC.

Is there a way to avoid the tax if I keep the money in the company / reinvesting?

Thanks

Danny

[J Scott]

Worst case, you'll pay your marginal tax rate in Federal taxes and your state/local rate. So, if you're in the 25% marginal bracket and your state/local taxes are 9% (for example), you should keep aside 34% for taxes.

That said, this is tremendously conservative, as your marginal rate will only apply to your highest amount of income (most income will be taxed at a lower rate as marginal rates are on a sliding scale) and you'll likely have deductions that will offset some of the income.

So, if you set aside this amount, you should have some left over come tax time, but should also be good in a worst case situation.

If you want to be more precise, fill out a 1040 with your actual income and deductions after each project and see where you stand. Remember again though that higher income is taxed more, so future projects will impact tax burden more than early in the year projects.