I bought a investment house that’s being built in Arizona. I should close on the house on May 1st and plan on flipping it immediately afterward. I know that I’ll have to pay short term capital gains taxes. Can I first deduct expenses such as interest, closing costs, landscaping fees, insurance, etc. from the capital gain, then only pay taxes on the remaining amount? I’m just an individual investor and not part of a corporation. I’d any appreciate any and all feedback.
Capital gains are determined on the profit you make which means your sale price minus all your costs for the property minus your purchase price. When you have your taxes done, it asks what your expenses were. Now for the disclaimer…(I’m not a tax advisor or consultant and you should consider talking to someone who is)
If you own it for less than 12 months, the IRS will treat your profit as ordinary income, and you’ll be taxed accordingly. You’ll put all your income and expenses on Schedule E. You should be able to deduct all of the business expenses that you mentioned.
Insert disclaimer here. Not valid in all 50 states. Your mileage may vary.
And so on.
Have you considered a 1031 tax exchange? It won’t help if you’re looking for the cash, but if you plan on buying another property right away, it will save you on the capital gains.