Flipping and taxes are a frequent issue for property investors, since for a long while people have been looking at the real estate market in the exact same way they look at the stock market. The instance of flipping in the real estate market became a great way to get quick funds.
But one of the things that people usually don't check on is the way to avoid the high tax bills on their profits. One of the first ways to avoid high taxes on your profit is treating the particular investment as a capital gain. The usual thing that occurs is that the if you sell a certain property in less than one year you will end up paying less tax, as this amount will be the same as the ordinary income tax rates which is in the 35% bracket. If you have owned the property for more than a year then you will have to pay the long term capital gains tax of 15%.
The way that you will get this property treated as a capital gain is if you can show that you had not tried to flip it. But in order to do this you would have to hold the property for a period of time which would go against the whole notion of flipping the property to make a quick earning. And another key fact of the matter is how often you flip, because if you flip properties too often the IRS will check your records and see if you are doing this for a living and then tax you in all the necessary area's.
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