Is tax taken out of the gain in buy and sell or just the profit?

[Bryan Lynch]

Hey Guys!  

I am currently in my first flip and things are going great! Bought at 165000 and about to hit the market for 320ish.  I did however have about 44k in rehab.  I owe 155*** and have another 30k in down payment, mortgage and other expenses like utilities. So my total out of pocket is 69*** I closed in Nov 2016 and will (hopefully) sell before then.  I figure with 15k is closing costs my break even is around 220*** plus closing.  My questions is do i pay capital gains on the difference between the 155*** and selling price or do I pay taxes on the profit only?  Please help!  I would like to add, that we kept our rehab costs down (full gut) because we did 95% of the work ourselves.  My dad, brother and I are experienced contractors and were able to pull our heads together and keep our costs low. So of the 44k we had in rehab that was all raw materials.  Had some help every now and then with under the table labor but we have not been paid for our hundreds of hours we have each put in.  Does the IRS allow me to deduct our hours?  We have all our hours documented with dates of course, I just cant seem to get a straight answer on the capital gains tax.  

And before any of the skeptics ask about our work being done ourselves it was all inspected and permits pulled thru the county and approved.  Its all legit!! Thanks guys :)