How to avoid taxes on home flips

Question

Hey there! So I am looking to try and build capital through doing a few small flips. How do most handle avoiding paying taxes profit, so that it can be used on the next property? I would be really interested if there was a good book on this that anyone could recommend and i'll gladly read up on tactics that way ::) Thanks again!

Matthew Paul · Answer

You could lose money on each one you do . You shouldnt owe taxes then

Deanna O. · Answer

@Syhed H. - I'd think that "over time" and "increasing capitol" are the key phrases here. 2-3 flips in several years is "investing" not a "profession" (the advantage of a BRRR is of course that you don't have income from the increased value, though your taxes become much more complex). Another disadvantage is that you become a landlord, which is a people business, and not everyone is suited to it. I've now done 2 "rehab&hold rentals" in the past 10 years. I haven't pulled a dime out of the properties, but they have increased my net worth far more than anything else, and put me in a much, much better position for retirement than all the previous years of IRA contributions.

Lien Vuong · Answer

Yes live in flip for two years minimum and you have capital gains of up to $250k. The other one is if you do a large renovation, rent it out, and sell it in the future and exchange to the funds into something else using 1031x vehicle.

Theresa Harris · Answer

Buy the house, live in it and fix it while you live there.  Check how long you need to live there in order to order to 'avoid' paying capital gains.  Some places it is 2 years.

Syed H. · Answer

U don’t. U pay the taxes. No one who does this professionally can get away with holding it over a year or trying to say you lived there.

You also can’t 1031.

Best way to minimize taxes is an S Corp.

James M Pitt · Answer

Build capital over time. If you live in a flip for two or more years .While you make repairs. If I recall correctly. You won't pay capital gains.  You didn't say professionaly. So I assume  "Live and Flip".

Syed H. · Answer

OP said he wanted to “build capital with a few small flips”. A few flips will be deemed and active business/dealer.

How to avoid taxes on home flips

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