Let me elaborate. I am 99.99 percent sure that the flip that I bought this yr will close in the first week of January 2014. Since all the work done for this house was done in 2013, can I put the profits of this sale in my 2013 taxes, or do I have to file them in 2014, or can I choose?
No, you can’t choose. The property you bought is not even considered in your inventory until the year of the sale. If you sell next year, then your acquisition date for tax purposes will be Jan 1 2014. Until then, you add all the money you spend on the property to your cost basis. You are not allowed to take any tax deductions for costs directly attributed to the property in 2013 even though you may have spent money on the property.
BTW, your sale profit on the property is NOT capital gains. It is ordinary income filed on Schedule C (1040) unless you are doing business in an entity that files its own tax return.
Had no idea that flip income would go under schedule C. This is great news for me actually.
Uhm… why?
Self employment tax will take 15.2% off the top, so no matter what tax bracket you’re in you will be over the capital gains rate.