Capital gain tax, what do you all do?

Question

Hello everyone

Long story short.... bought another house,and was set on making it a rental, but there is real potential to renovate the house and make a decent profit. I have all the numbers in place, and of course when it comes to capital gains tax, that is where I am a newbie (I know the %)

My question is simply, when you all do a flip do you just pay the capital gains tax or is there ways to be smart about it? I am only asking for legal ways to do it.

Thank you.

Basit Siddiqi · Answer

@Soren AgerThe first thing you need to determine is if this sale will result in capital gains or ordinary income.If this is ordinary income, your goal is to get this number as low as possible by making sure you are taking all the deductions you can. This will result in an overall less amount in tax.

Ned Carey · Answer

@Soren Ager money made from rehabbing and flipping a house is considered ordinary income. You do not get the advantage of lower capital gains rates. You may be able to save some self employment tax by doing the flips in a company taxed as an S Corp.

You may be able to use retirement funds for flipping and not be taxed or at least defer the tax. however that means all the profits stay in the retirement account. This is a complex issue that requires professional advice to do this properly.

look up Self directed IRA or 401K

Soren Ager · Answer

Thank you all... well things change rapidly. After seeing what the unit can rent fore, I am so keeping it. It goes way beyond my expectations, and my cash flow is doing well. Thank you though for the advise. I have asked my financial adviser to work it up anyway to get educated and have a template for the future, to at least have some directions.

Capital gain tax, what do you all do?

3 Replies