Paying taxes on Flips is it worth it as a business?

Question

If flipping is a bad tax strategy or one of the worst RE strategies as far as taxation, how DO you make money by flipping? I have read many different posts that talk about how if your goal is to minimize taxes, flipping isn't the business to be in.

This is where I am stuck. I believe to make money you of course need to minimize your taxes. What kind of tax percentage are full time flippers paying? If my goal is to become a full time flipper am I just shooting myself in the foot at tax time? Am I just “buying” myself a job? How do I set myself up so I don’t have to give all of my profits to the government? Even with a good CPA is it worth it?

Also, with Trump’s proposed tax plan eliminating many deductions what is your opinion on how this may affect the flipping business?

J Scott · Answer

First, flipping is a job. Unless you're simply partnering as an equity partner (which incurs risk), it's near impossible to completely take the job out of flipping.

As for taxes, what businesses would you otherwise consider starting, and what are the tax implications of those businesses?

Most are going to be the same. Those that are different are unlikely to be active businesses -- they are more likely to be investing strategies, where you are paying capital gains as opposed to earning ordinary business income.

Regardless, it sounds to me like you're looking for an excuse not to get into flipping. If that's the case, this business probably isn't for you anyway. Good to realize that sooner rather than later.

Russell Brazil · Answer

Make money, pay your taxes, and feel blessed that you have the opportunity to make lots of money even if that means you have to pay taxes.

Brian Pulaski · Answer

Even after taxes, flipping can make money if you play it correct. I have never stressed about how much taxes I am paying, as long as I still feel like I made good money after taxation.

Account Closed · Answer

lol. Just like Hilary implied by saying to trump you haven't paid taxes. And trump genius comment: it's be cause I'm smart.

Figure out how to keep your hard earn dollar in your pocket ultimate your going to need bigger pockets. Boo yeah

Account Closed · Answer

Is a job worth it if you have to pay taxes?

J Scott · Answer

The best way to minimize taxes is to become an accredited investor (as defined by the IRS), which will open you up to tax shelter investments that will help you reduce your effective tax rate. Unfortunately, many of these shelters are only available to accredited investors, so that's the major hurdle you need to achieve first.

Susan K. · Answer

Thanks everyone for the input. I guess when I had read some posts on BP many of them mentioned that flipping is not a good tax strategy so I think I was confused by that. I was thinking that if you had a "flipping" business maybe some of the IRS rules were different than if you had say a "widget" business. But if they are treated equally under the IRS then that answers my somewhat confusing questions. I'm one of those that if I have a nightmare it involves either getting struck by lightening or getting called into an IRS audit.

Kevin Coggins · Answer

Just factor the taxes into your calculations, if you flip a house in a month for 30k profit and pay 30% in taxes you still made 21k in a month. If you're paying taxes, that at least means you're making profit. If I can make $50 in 10 minutes of work I don't really care if I have to pay taxes on it.

Jay Hinrichs · Answer

careful not to let the tax tail wag the dog.... its about write on's not write offs

if you flip correctly and make decent money you pay tax and have a bunch left over.

rental income can be sheltered and is great if you want to be in the landlording business .. not everyone does. and not everyone is good at it.. some are terrible at it myself included can't stand landlording personally.... but there is shelter in depreciation. however unless you own a ton of assests its pretty minor

take the 150k rental 27.5 year depreciation .. deduct value of lot say 20k depreciate 130k ( your not doing cost segregation in this example) that's 4,700 off your gross income.. so a tax savings at 30% rate 1,200 to 1,500 a year... so just do the math.

Paying taxes on Flips is it worth it as a business?

Paying taxes on Flips is it worth it as a business?

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