Myself and my investor partners aren’t in the flipping business, however. What is the capital gains tax after a flip under 2 year seasoning for NOO. Also, does this number increase once you have flipped a few houses in a certain period of time? Thanks in advance.
What did you do with the property during your holding period? Did you rent it out, or was it always for sale?
The holding period is/was for only like 2-3 months. We did some rehab while I live in it. It’s still considered a NOO.
You have a rehab-flip property that the IRS considers inventory to your property flipping business. In the absence of a formal business entity, your flip profits will be considered self-employment income. For your federal income tax return, ordinary income tax rates apply and payroll taxes will be due also. Report your flip income on Schedule C (1040) and compute your payroll taxes on Schedule SE (1040).
If your state also has an income tax, your state tax liability will be in addition to the federal tax bite.
BTW, since you are about to flip a prroperty, you do have a flipping business.
Just my layman’s opinion
Most people pay about 25% on flips (rehabs). But if done right, you can pay about 5%…seek a tax specialist, not a CPA out, of it you like, i can give you the number to my CPA in FL…this is his field of expertise. His clientel is mainly real estate investors only, plus he is a major investor himself buying over 50properties a yr and flipping the majority…
But it will cost money about $2020 to set up the companies but hey its tax deductible as well…it will pay for itself in the 1st deal.
I am VERY interested in talking with your associate. Please forward his information to me. Thanks.
woody,
With a business entity, such as a C-corp, you can take advantage of the corporate tax rate of 15% on the first $50K in net corporate income. Legitimate business deductions can lower your taxable profit enough so that the tax on your taxable corporate income could be as low as 5% of your revenues (but still 15% of your net income).
To take these business deductions, you must actually spend the money. Money withdrawn from the C-corp as a dividend will be taxed again on your personal tax return at your ordinary income tax rate.
I have no idea what this FL CPA will propose. Make sure you go into any discussions with your eyes open.
Woody…why dont you contact him at Certifiedtaxexperts@msn.com and see what he does before knocking it… It wont cost you a thing to talk to the man…