Hello all,
Curious about/can't remember:
Let's say you buy a property for a bargain. 100k sales price, needs 10k of work, can sell for 125. Is it OK to buy, make 10k of repairs, rent out for 1 year, deduct the cost of repairs, and sell the next year. This would clear out those repair monies and only expose one to cap. gains taxes on the proceeds (unless he/she exchanged).
Does anyone have a problem with this? Kind of woke up to the idea this morning....
Trex
Taxing situations...real estate
if those are repairs and maintenance, no problem expensing.
if they add to the utility - quantity, quality or life - of the asset, you have to capitalize and depreciate (so you would recapture some of the depreciation). Your goal of getting LTCG treatment is admirable. It is something we are considering with our newly contemplated owner-builder activities (saves $13k in one year).
if they add to the utility - quantity, quality or life - of the asset, you have to capitalize and depreciate (so you would recapture some of the depreciation). Your goal of getting LTCG treatment is admirable. It is something we are considering with our newly contemplated owner-builder activities (saves $13k in one year).
regards,
wanderer
The field has eyes / the wood has ears / I will see / be silent and hear
wanderer
The field has eyes / the wood has ears / I will see / be silent and hear
Trex,
I am not qualified to do taxes ... I 've used a CPA for years. So I called my accountant, here's the deal:
1. No requirement to rent the property to take the repair costs as a deduction. A schedule D is used (rather than schedule E).
2. A fix n' flip held for less than one year will be taxed as a short term capitol gain (taxed as ordinary income). Held more than a year, taxed as a long term gain (20%).
3. If the fix n'flip begins to look like a bussiness the IRS will be looking for self employment tax in addition to short/long term taxes. Doing 1-2 flips per year as a "hobby" will not trigger self employed taxes.
Hope this helps, TR
I am not qualified to do taxes ... I 've used a CPA for years. So I called my accountant, here's the deal:
1. No requirement to rent the property to take the repair costs as a deduction. A schedule D is used (rather than schedule E).
2. A fix n' flip held for less than one year will be taxed as a short term capitol gain (taxed as ordinary income). Held more than a year, taxed as a long term gain (20%).
3. If the fix n'flip begins to look like a bussiness the IRS will be looking for self employment tax in addition to short/long term taxes. Doing 1-2 flips per year as a "hobby" will not trigger self employed taxes.
Hope this helps, TR
"Buy Low Sell High"