How to Structure Flip Profits, Minimize 2019 Taxes

[Josh Garner]

I'm looking to sell a flip in spring 2019..... I'll have about 150k of my own cash into it and I hope to sell for around 200k. I'd like to not have all that extra income on my personal taxes for 2019, but I'd also like to pull out my original investment (150k) from the deal, once the rehab is complete. Does anyone have thoughts or strategies on this?

Goal = not have to report the anticipated 50k profit on my personal tax return for 2019

Currently, the property is held in my name and purchased with all cash (no debt on property)

Bought the property in Oct 2018, and hope to sell or cash out in March/April 2019

65k purchase + 85k rehab = 150k total......ARV around 200k

I live in Oregon, and the property is in Tennessee.

Thanks for your thoughts!

[Basit Siddiqi]

@Josh Garner

If you sell the property and your intent when you purchased it was to buy, rehab and then sell back; you are considered purchasing and selling inventory which is ordinary income and subject to federal income tax, state income tax, and self-employment tax.
You may be able to avoid paying the tax if you to a cash-out refinance and hold the property as a rental.

If you continue with your plan of "flipping" the property, you may want to consider tracking your expenses outside of the purchase and sale of the property(marketing, driving, etc) this will be used to reduce your taxable income.

You may also want to look to see if you can put a portion of the proceeds in some type of retirement vehicle allowing you to reduce your taxable income.