[CPA Question] Is there a limit on live-in flip tax savings?

3 Replies

My wife and I did a live-in flip for 2 years and sold for a $40k profit. 

We bought our next house less than a year later. 

We may rent this house out, but curious if we sold it again (it's 2 years later now), if we'd pay tax on the profit. Profit would be about $25k. 

Is there a limit how many times you use the homestead exemption? (Publication 503)?

If yes, we probably would need to rent it out :)

Originally posted by @Joe Cassandra :

My wife and I did a live-in flip for 2 years and sold for a $40k profit. 

We bought our next house less than a year later. 

We may rent this house out, but curious if we sold it again (it's 2 years later now), if we'd pay tax on the profit. Profit would be about $25k. 

Is there a limit how many times you use the homestead exemption? (Publication 503)?

If yes, we probably would need to rent it out :)

Joe, we live very close :) 

Yes, you cannot  claim section 121 every year. There has to be a break of 2 years, so if you have already lived in the new house for 2 years and have not clamied exclusion in last two years, you should be fine. 

Originally posted by @Ashish Acharya :
Originally posted by @Joe Cassandra:

My wife and I did a live-in flip for 2 years and sold for a $40k profit. 

We bought our next house less than a year later. 

We may rent this house out, but curious if we sold it again (it's 2 years later now), if we'd pay tax on the profit. Profit would be about $25k. 

Is there a limit how many times you use the homestead exemption? (Publication 503)?

If yes, we probably would need to rent it out :)

Joe, we live very close :) 

Yes, you cannot  claim section 121 every year. There has to be a break of 2 years, so if you have already lived in the new house for 2 years and have not clamied exclusion in last two years, you should be fine. 

Thanks Ashish! Will drop you a DM.

Good to know. No matter how many different ways I googled, I couldn't get a straight answer, so appreciate it.

I think for those who don't have a ton of capital, a live-in flip is the easiest way to start real estate investing...and it's the least stressful as you can start with an FHA loan.

Then, fix it up good over 2 years, then move out.

Our first house for 40k profit, we created new comps for the area as most of the houses around us had stuck with the 1980s styles.

Now, we check every so often how the neighborhood is doing,  and everyone is updating now :)

Originally posted by @Joe Cassandra :
Originally posted by @Ashish Acharya:
Originally posted by @Joe Cassandra:

My wife and I did a live-in flip for 2 years and sold for a $40k profit. 

We bought our next house less than a year later. 

We may rent this house out, but curious if we sold it again (it's 2 years later now), if we'd pay tax on the profit. Profit would be about $25k. 

Is there a limit how many times you use the homestead exemption? (Publication 503)?

If yes, we probably would need to rent it out :)

Joe, we live very close :) 

Yes, you cannot  claim section 121 every year. There has to be a break of 2 years, so if you have already lived in the new house for 2 years and have not clamied exclusion in last two years, you should be fine. 

Thanks Ashish! Will drop you a DM.

Good to know. No matter how many different ways I googled, I couldn't get a straight answer, so appreciate it.

I think for those who don't have a ton of capital, a live-in flip is the easiest way to start real estate investing...and it's the least stressful as you can start with an FHA loan.

Then, fix it up good over 2 years, then move out.

Our first house for 40k profit, we created new comps for the area as most of the houses around us had stuck with the 1980s styles.

Now, we check every so often how the neighborhood is doing,  and everyone is updating now :)

 Yes it is a easiest but definitely not the most effective and efficient. Two houses in four years? If you know the right strategy, you can do 40 houses in 4 years.  At least that’s my plan and it’s on track. Good luck with what you are doing.