Flip taking longer than a year and tax implications

[Sheena Varghese]

Hello,

My current flip will take longer than a year, about 18 months.  Can I still deduct all renovation costs from the profit in regards to paying taxes on the profit.  I have all cash in the property and for renovations, so no loans.  I just want to make sure that I don't end up paying taxes on it like I would if it was a long term property and I sell it without a loan to repay, therefore, it looks like all profits to IRS.  I hope that makes sense.  Thank you

[Basit Siddiqi]

You will incur two types of costs when it comes to a flip

A) Costs directly related to the property
B) Overhead costs(I.E. LLC Fees, Travel, marketing, etc)

You can deduct overhead costs in the year incurred.

Costs related to the property are accumulated and factored in until the sale of the property.