Capital Gains for DIY Flipper

[Brian May]

I am looking to do my first flip and trying to get a sense for how best to realize my expenses for capital gains as a DIY flipper. As a DIY flipper my labor/install expenses are significantly less than a flipper that would contract out certain items. As an example, I have my flooring material costs at $2.50/sf, but I installed myself over say 10 hours. A person that hires the install out might be charged $2.00/sf for install.

How should I go about capturing these expenses when it comes to calculating the expenses for the overall profit and taxes required for capital gains? Which is the best option: 1) only include material expenses since I did the work myself, 2) use my tracked labor hours times a set hourly rate or 3) use a general install/labor rates as if the work was hired out?

[Ashish Acharya]

Originally posted by @Brian May:

I am looking to do my first flip and trying to get a sense for how best to realize my expenses for capital gains as a DIY flipper. As a DIY flipper my labor/install expenses are significantly less than a flipper that would contract out certain items. As an example, I have my flooring material costs at $2.50/sf, but I installed myself over say 10 hours. A person that hires the install out might be charged $2.00/sf for install.

How should I go about capturing these expenses when it comes to calculating the expenses for the overall profit and taxes required for capital gains? Which is the best option: 1) only include material expenses since I did the work myself, 2) use my tracked labor hours times a set hourly rate or 3) use a general install/labor rates as if the work was hired out?

 There are no capital gains for flippers. You will be paying ordinary income tax plus self employment tax if you are going to do this often. 

Unless you pay yourself, you can’t deduct the labor expenses.