Flipping houses... expenses. capitalized or deductible?

5 Replies

I am a real estate professional. (not passive activity).. I file jointly with my husband who is a doctor and has high income (500k/yr). I have LLC's for mostly flipping properties. I have only 3-4 rentals in my 3 LLC's .. The rest of the 20 some properties are for flipping. In getting these properties in livable condition ready for sale, do these repair expenses have to be capitalized or can be deducted in same year? What about labor costs? Actual Material costs? Home owners insurance paid on properties? Car expenses that I use for this business? Can I use my car expenses for each LLC or does it have to be more specific and allocated to each house (which is close to impossible). What schedule do I need to use , schedule C or E? Is there any limits on the losses? I am finding alot of conflicting information on these issues. Please help!

Please don't think I am being rude, but when I started, I wrote a business plan, then reviewed it with my accountant and attorney...

Their advice is why I have the structure I have now... An "S" Corp. performs work, an LLC owns the flips and hires the other entity to rehab, etc.

You are talking about significant money here... you should consult a professional familiar with the laws of your State.

John Rogers

you asked a ton of questions so not sure can answer them all. like poster said above, this is is what an accountant is for.

for flipping, you don't capitalize everything. it's inventory so it's just an expense.