House flip capital gains

[Jefferson Mcvicker]

I’m planning on to flip a house later this year. When I profit from a flip I know I have to pay the capital gains, is the tax paid at closing? Or do I pay the capital gains when I do my taxes next year?

[Nicholas Aiola]

@Ujwal Velagapudi @Stone Saathoff

Profits from flips held for longer than one year are still taxed as ordinary income subject to self-employment. Gains from the sale of rental properties held for longer than one year are taxed at preferential long-term capital gains rates.

If you are in the business of flipping, you are a dealer in the eyes of the IRS and properties are considered inventory. The holding period is irrelevant.

Let this serve as a public caution to those who are not qualified to give tax advice on a public forum - we all want to make sure that those asking the questions receive relevant and correct information.