Taxes on Flip Project

[Ryan Kephart]

Hello,

I just bought a property for 160k in 2022, spent roughly 40k on it, and sold it for roughly 210k in 2023. 

I'm confident I will be able to figure out how to write off the 40k on my 2022 tax return. I think I can write off more than 40k actually including commissions and another few items. It might turn out to be a loss or a break even when I add up all the deductions.

I sold the property in 2023 but spent money on the rehab in 2022. Will I have a capital gain in 2023? That's my first question. My apologies I don't know enough about RE taxes. Im uncertain of the capital gain calculation and which form to report. Would it be the 210k sell price minus the 160k buy price for the capital gain calculation? Or do I get to use my deductions against the sale price for that calculation?

Let me know if you have any ideas or if you are an RE tax professional. I'm trying to file my taxes soon!

Thank you so much,

Ryan Kephart

[Michael Plaks]

@Ryan Kephart

You will have nothing except business overhead expenses to report for 2022. Your rehab costs will be reported in 2023 where they will be an offset against the sale price, resulting in a loss for 2023. That is, if you do not do other flips this year.

FWIW, a loss on your first flip is extremely common, so don't kick yourself.