Hi Folks, I am getting ready to really get into flipping properties, but my concern is finances. I read that everything I do to look for a home is a write off. I read that I should keep track of my mileage, and stuff like that. My question is when it comes to tax time, how do I write it off if I dont own a company, or dont have an LLC or whatever? Dont I need to have some sort of entity to use for the right off…some home business or something?
Thanks!
Don’t know what your particular situation is, so I must reccommend you speak to a CPA.
However, I can tell you that I deducted mileage and travel expenses when I was looking for property but had not bought yet. As long as you can show that you were looking for a property there should be no problem. It will only become an issue if you are audited.
When you go looking for property, make sure you get a flyer or two from the property, a business card from your Realtor, save contracts that don’t go through. Anything you can keep to “prove” you were looking for an investment property. As long as you have sufficient “proof” to support your investment activities and that your deductions were incurred during these investments, you should be fine.
Heres kind of a weird question but this last 4th of july i spent about $400 for a 4th of July Party. Question is, can this be a write off for business entertainment? The reality of it is, is that i had my lawn service person there, my realtor, and a few people that help me rehab my houses. I would think i could deduct the fireworks, food, and beverages right?
carlittle, you have suggested a number of time to speak to a CPA about taxes. This is incorrect. CPAs are accountants and most do not know squat about taxes, but yes, some do taxes preparation.
A true tax professional is an EA (enrolled agent). To leanr more about EAs read the info at the following link:
http://www.irs.gov/taxpros/agents/article/0,,id=100710,00.html
You are correct. Not all CPA’s do taxes. In the future I will reccommend a Tax Consultant. This could be any professional that provides tax advice. The point of my recommendation was that if you have tax questions you should seek a tax professional. This is of course not a substitue for learning it yourself, but if you are going to learn it, learn it from someone that does it as a professional is should know the right answer. This does not mean to talk to your neighbor that does taxes during tax season to earn extra cash. 
I am getting ready to sell my investment prop. and possibly buy another or instead use the funds to renovate my primary,
If I buy and use 1031 to defer CG tax wont I then be compunding the amount I owe at the time that I sell the 2nd property-- itseems that with all the akcolages of this 1031 -its jsut a deferment, people act like you wont ever have to apy the taxes, I do understand, that it will free up $$ initially–any thoughts form anyone
1031 only defers taxes does not avoid them. Not sure what you mean by compound the amt. of taxes; if you make addition profit then you will owe addition tax.
Example, if Jane and Joe have a 100k gain in a property. Joe sells and pays CapGains and then buys another property/investment with 20% down (with his 85k) (property is $425k). Jane does a 1031k and retains her 100k and does 20% down (buys a $500k house). Both properties double in value. Now Joe owes a 850K property; Janes is worth $1000k.If both sell and pay tax then Joe has $445k in his pocket vs Jane has $510k. Sure Jane ends up paying more tax, but that’s bevcuase she earns more profit.
klrss,
Everything gets reported on a schedule E with the IRS - no need to form an llc, corp, home business or anything. Schedule E is where rental properties are reported to the IRS.