Private money lender taxes

[Darren Looker]

I recently converted my primary residence into a SFR and completed a cash out refi. I plan to invest some of the money in a business doing flips and remodels with a partner. Are there any strategies to avoid my profits being taxed as ordinary income?

[Ashish Acharya]

Originally posted by @David Barnett:

Hold your remodels for 1 year and 1 day.  That would turn your profits into long term capital gains instead of ordinary income.

Unfortunately, that is not a correct advice. Please don’t do this. 

Even if you old it for more than a year, but your property  is flip, you are going to pay ordinary taxes plus self employment taxes if you do it regularly. 

If you intention changed, and you rented a property, then yes, you could get long term cap gain if you hold of for more than year.