What is your tax rate when flipping houses

9 Replies

Hi Everyone, I'm about to obtain a house and flip it. I was wondering what you're tax rate is when you flip houses. From what I read, I could be paying 40-50% in taxes. Do you guys have any strategies you use to save on taxes. Also is the IRS going to look at your taxes with more closely since there is a lot of money coming and going. 

@Laith Ali

If you are flipping, the properties are inventory - just as if you were selling shoes or automobiles.  Your proceeds of sale will be treated as income and taxed accordingly.

1(506) 471-4126

@Laith Ali my understanding is that if you flip it within 1 year, you'll be charged taxes at your normal tax rate, so it depends on what you make...and if you flip after 1 year, then it will be taxed as capital gains. 

Onwards!

sjw

Originally posted by @Laith Ali :

Hi Everyone, I'm about to obtain a house and flip it. I was wondering what you're tax rate is when you flip houses. From what I read, I could be paying 40-50% in taxes. Do you guys have any strategies you use to save on taxes. Also is the IRS going to look at your taxes with more closely since there is a lot of money coming and going. 

 Your sale proceeds minus all costs, including purchase price, renovations, selling fees, etc are tax at your ordinary tax rates. 

It’s not treated differently than any other forms of income. 

Originally posted by @Shawn Ward :

@Laith Ali my understanding is that if you flip it within 1 year, you'll be charged taxes at your normal tax rate, so it depends on what you make...and if you flip after 1 year, then it will be taxed as capital gains. 

Onwards!

sjw

 I wouldn't build your business plan on that, but would confirm with you accountant about intent first.   You might be able to play the "I bought it for rental purposes, but something came-up and I sold it" line once or twice, but if you are regularly rolling properties, they will be considered inventory, not assets.

1(506) 471-4126

If you are waiting for the price to rise. It makes sense to renovate most lease it briefly and do flooring and counters last after tenant moves out. You can put it on the market like on 10th and wait to close 1 year after previous COE to take advantage of long term capital gain. the likely hood getting audited in way higher vs if you are waged year after year.

I was hoping there was something i was missing because I always hear owning a business is great because you pay so little in taxes, but at the same time I also hear business pay so much taxes. I'll believe the second statement from  now. It's really a shame that we have to pay so much taxes, its going to be really hard to grow your business if they keep taking half your income. 

Originally posted by @Laith Ali :

I was hoping there was something i was missing because I always hear owning a business is great because you pay so little in taxes, but at the same time I also hear business pay so much taxes. I'll believe the second statement from  now. It's really a shame that we have to pay so much taxes, its going to be really hard to grow your business if they keep taking half your income. 

I pay a lot in taxes....and you know what, I feel blessed to live in a time and a place where I can make a ton of money doing something I love.  

Russell Brazil, Real Estate Agent in Maryland (#648402), Virginia (#0225219736), District of Columbia (#SP98375353), and Massachusetts (#9​0​5​2​3​4​6)
(301) 893-4635
Originally posted by @Russell Brazil :
Originally posted by @Laith Ali:

I was hoping there was something i was missing because I always hear owning a business is great because you pay so little in taxes, but at the same time I also hear business pay so much taxes. I'll believe the second statement from  now. It's really a shame that we have to pay so much taxes, its going to be really hard to grow your business if they keep taking half your income. 

I pay a lot in taxes....and you know what, I feel blessed to live in a time and a place where I can make a ton of money doing something I love.  

It's really interesting that you feel blessed paying that much in taxes. I wish you could send some money my way so that you would get more blessing :)

I second what @Russell Brazil said. My first boss would tell me that his life's goal was to pay $1,000,000 a year in taxes. I always thought he was crazy, but I've now made that my goal as well.
(267) 520-0454

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