Tax Reporting for Flipping Houses
June 8, 2008
Do you flip houses? Then you better be paying taxes; especially if you make a substantial income from it. You may think youre getting away with it but you are very wrong. If you get caught you WILL have to pay but you might also pay extra for fees and interest that bypasses the assets in your possession. I am not a tax accountant nor do I know the real estate laws in your state but I do know what you need to discuss with your accountant and also a few measures you can take if you do your own taxes.
The major problem with doing taxes for yourself is that you dont know the tax laws. You may think you made $5,000 but that is only the gross income before taxes. Many businesses have problems with paying taxes because it destroys the bottom line but they must be paid. There are two basic classifications you can place house flipping into; the first of which are self employed taxes and short term capital gain. You would rather be placed in the short term capital game section because you pay fewer taxes. If youre self employed, you have to start paying as much taxes as a business. To figure out how you fit, you have to look at a few elements. Firstly, you need to see how long the land is kept. Also, you have to keep track of how many transactions you make. Because they will all be real estate transactions, you will probably be placed in the self employed section.
You may think you dont have to worry about taxes because you have not been audited and figure you never will be but with all the house flipping commercials on television, the IRS will start looking into real estate people to increase revenue.
Some of the people flipping houses can earn anywhere from $50,000-$150,000 from a single transaction. I predict the IRS will start monitoring this market more closely foreseeing regular people being unaware of tax laws.
George Christodoulou,
If you have any questions about tax reporting for flipping houses,
please visit, http://houseflipblog.com for more information.
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