I just bought a fc 20,000. I have sold it for 42,500. I am only getting 20% down and owner financing for 3 years and then a balloon payment.
Will I pay taxes in Jan for the whole 22,300 profit or will I only have to pay taxes on the downpayment and one monthly payment when I do my taxes?
Thanks sooooo much
Sounds like an installment sale.
Don’t forget to deduct your expenses from the sales price. Your basis just isn’t the cost of the home.
When you are flipping property, the transaction is a dealer disposition. All of the potential profit is taxable as ordinary income in the year of the sale, even if you have not received all your profit yet. Additionally, the sale profit is subject to self-employment income taxes.
Dealer dispositions are not allowed to use installment sale tax treatment. Flipped property can not participate in a 1031 tax deferred exchange, and, capital gains tax treatment does not apply.
Consult your tax advisor for specific details.
total tax bite ~45%.
be SURE to pick up ALL of your expenses: mileage while looking for the place, cell phone calls, purchasing expenses, sales expenses.
This is so confusing. So I thought I made 22,000 profit but I will have to give uncle sam about half of it. :{:{
Yes, but you get to keep the other half. The tax man never takes 100% of your profit.