Can I deduct this??

I recently spoke with a self proclaimed “tax expert” who told me that when
you buy and sell a home(buy fix flip) wihtin a one year time frame,every single penny you spend on that project is deductible, even if it would normally be considered a “repair” and not an “improvement”. He also told me that all closing costs are deductible, even loan origination fees,insurance,appraisals,etc which the IRS website says are not. He basically says that any cost associated with buying it, fixing it, and selling it are deductible.

Is he right???

now what page of the IRS did you look at?

are you confusing owner-occupant with business?

there is a big difference.

repairs are improvements - they’re capital improvements - those costs are deductible.

that means if you buy it for 10 spend 5 to fix it and sell it for 30, your costs were 15. 30 - 15 = capital gain (15).

if your business pays for an appraisal - that’s an expense. if business paid for it - it’s an expense.

now where it gets interesting (and this is CPA territory), if you’re in the business of buying fixing and selling homes (dealing), when you sell this particular house and make 15 in say the 4th quarter of the fiscal year - then buy tools and computer etc… how is all this deducted?


best to consult a CPA who knows real estate and BUSINESS.

thanks for your help,

It is considered business as long as you dont occupy it, correct??

even if you dont actually have a business.


Your friend is basically correct. If you are flipping property, you ARE engaged in an active income business. If you do this as a sole proprietor, your net profit is ordinary income reported on Schedule C and Schedule SE.

In a nutshell, every penny you spent on the flip property to acquire, rehab, maintain, and sell is totalled and becomes your “Cost of Goods Sold”. Subtract this from your sale price and you have your taxable profit.

Your friend’s understanding, however, needs a little adjustment. There is no one-year maximum time frame for your rehab-flip. Even if your rehab-flip takes more than one year to complete and sell, the tax treatment is the same as if it only took one month.


Repairs are NOT improvements. There is a difference. A repair fixes something that is broken. An improvement adds value or increases the useful life of the property. A repair is usually deductible, an improvement is a capital investment that must be depreciated.

thankyou david,

very helpful!