Flip to personal residence

[Pete Bhanshali]

Hello BiggerPockets, 

Currently I am working on a flip project, I should be done with it before the end of the year. Due to market uncertainty, I might have to postpone selling the property or take a loss.  My other half suggested that we should move into the house until market recovers and we should rent out the current house. I am liking the idea instead of renting the new house. 

For 2022 tax, I will be able to claim all the expenses, interest, taxes and insurance. Now If I am unable to sell the house and I move into the house, what happens with the deductions for 2023 and previous year expenses that I had claimed in my taxes. 

Thank you for taking the time to read and reply to my post. 

Pete...



 

[Natalie Kolodij]

Quote from @Pete Bhanshali:

Hello BiggerPockets, 

Currently I am working on a flip project, I should be done with it before the end of the year. Due to market uncertainty, I might have to postpone selling the property or take a loss.  My other half suggested that we should move into the house until market recovers and we should rent out the current house. I am liking the idea instead of renting the new house. 

For 2022 tax, I will be able to claim all the expenses, interest, taxes and insurance. Now If I am unable to sell the house and I move into the house, what happens with the deductions for 2023 and previous year expenses that I had claimed in my taxes. 

Thank you for taking the time to read and reply to my post. 

Pete...



 

 On a flip the majority of your expenses should be capitalized, and not written off until the property is sold. 

You can make an election to write off tax/interest but not really much else. ALl of the carrying costs, renovations, ect get added to your basis of the property. 

And when you sell it those expenses all offset the income of the sale (They're a cost of goods sold). 

So depending on what you wrote off...you may need to amend your prior year. 

If you move into the house those expenses before you move in will be capitalized and when you move/sell it will reduce your gain.