Mercer Island, WA · Member since 2016 · 1 post · 0 votes
We are rehabbing a house in Seattle and trying to figure out what is the best way to flip the house and pay as little tax as possible on the net profit portion (I assume). The house is under a single person LLC (which is me). Does anyone have any suggestions on how and when to sell the house? What kind of tax are we facing and what percentage are we looking at? How does all the people flipping houses do it? Thanks you in advance for the help.
Tacoma, WA · Member since 2010 · 203 posts · 93 votes
10y
Unless you chose some other tax treatment for the LLC it will just pass through. Any gain will be taxed as ordinary income at your marginal tax rate. Don't forget about SE taxes.
Seattle, WA · Member since 2015 · 6 posts · 1 vote
10y
For capital gains payments, it depends on how much you make that year. For most people you'll pay 15% unless you're in the highest income bracket, then it's 20% for Washington State.
Tacoma, WA · Member since 2010 · 203 posts · 93 votes
10y
Unless you chose some other tax treatment for the LLC it will just pass through. Any gain will be taxed as ordinary income at your marginal tax rate. Don't forget about SE taxes.
For capital gains payments, it depends on how much you make that year. For most people you'll pay 15% unless you're in the highest income bracket, then it's 20% for Washington State.
Flips don't qualify for capital gains. Flips are taxed as ordinary income just like the income you get at one's job.
San Francisco, CA · Member since 2015 · 786 posts · 717 votes
10y
If you make more than $50,000, you'll probably want to do an S-corp election on your single member LLC and pay yourself an salary that is determined by your CPA. Otherwise, you'll have to pay self-employment tax (SE as was mentioned in the post above).
Rental Property Investor · East Wenatchee, WA · Member since 2014 · 10k+ posts · 16k+ votes
10y
Good to be thinking about your silent partner in Uncle Sam that shows up to claim his 40%ish for short term trading. Throw in some sales agent commissions... First run the numbers on your net, net, net profit. Scary stuff!
At least WA just wants the excise taxes of about 1.7% of gross.
For tax advantages, gotta hold to day 366. Many say that doesn't matter if your intent was to flip, but I've never seen the 'intent' box on any IRS schedules or forms. Cheers!