I am in the process of launching my REI career. My strategy for now is to flip homes. Buy low, sell at FMV.
Could someone please tell me how will I be taxed by the IRS on the profits that I make? If I don’t start an entity and flip homes under my own name, would the income created from flipping be categorized as business income by the IRS? How should I declare that income on my tax returns?
If you sell in less than a year from purchase, you will be teaxed at the short-term capital gains rate (it is the same rate as the income tax bracket that you’re in)…if you hold it for more than a year, you will be taxed at the long-term capital gains rate of 15%.
The income would be classified as capital gains, not business income.
Keep scrupulous records and increase the cost basis of the property appropriately.