New fix & flipper

4 Replies

Hello BP members, I am new to fix and flipping in the dmv area. I want to know about the taxes involved with fix & flipping. Do you get taxed on what you don't put into a second property or are you taxed on the whole deal of you take a piece of the profit for yourself? So for example if I flip a house and profit 100k and decide to keep 40k for myself and put the 60k left over into my next project will I be taxed on the whole 100k or just the 40k I took for my self?

@Kevin Simmons

I think that you would be taxed on your total profits unless you did a 1031 tax exchange where you could defer taxes, and roll your monies into another property of greater value.  


@Kevin Simmons

Each event of a sale of a piece of real estate triggers a recognition of gain.  

And unfortunately you cannot do a 1031 exchange if your intent is primarily to resell the property.  1031 exchanges are property in which your intent is to...."hold for productive use in business, trade, or for investment."  There is no statutory holding period but the self described industry practice of fixing and flipping implies that your intent is to buy fix and sell - or primarily to sell.  So change your model a little.  Instead of buy fix sell.  Buy fix rent for a bit and then sell using a 1031 exchange and defer all tax.  Or buy rent for a while, then fix and sell.  Change your intent and gain access to a very powerful tax mitigating tool.