Taxes And Flipping Property

Property Flipping is considered investing in real estate.  Just like any other investment real estate is subject to state and US capital gains taxes.  Depending on how long you hold your real estate investment will determine how much tax you will pay in capital gains.

Capital Gains tax is considered either short term or long term.  Uncle Sam wants you to invest for the long term so any investment that is held for one year or longer is considered a long term investment.  Generally property flipped as a real estate investment is not held for longer than a year as the carrying costs would eat into your investment profit.  In the event you do hold a flipped property for over a year you would pay 20% tax on whatever profit you realize from your real estate investment property.

Short Term capital gains tax is taxed at the standard rates so if you are successful at flipping property you could find yourself paying out a large percentage of your real estate profits in tax.  Unfortunately the nature of property flipping is to realize short term capital gains from your profit so you will just want to ensure you take all legal tax deductions to keep your capital gains taxes at a minimum. 

If you find yourself paying alot of tax to Uncle Sam consider the bright side.  This means you are a successful property flipper capable of earning a large income and profit from real estate investing.