Flip house options

[Luke Tetreault]

We are fairly new to real estate investing and we have done multiple BRRRRs and just listed our first flip for sale. After doing more research and talking with our CPA, we will owe about $30,000 in capital gains tax. This house was bought with a conventional loan under my personal name. I am looking for options on what we can do to offset our profits and not pay the taxes. We hold 15 apartments and I have never done a cost segregation on any of them, which could be one option I think? We were looking into creating an S-Corp for our flip properties because we were told that an S-corp bypasses capital gains tax. Would it be an option to create an S-corp and move the house into it prior to sale or would that still be considered a regular sale therefore, having to pay capital gains tax either way? A third option, we hold the property, rent it for two years and then sell. The property does not really cash flow but it would break even. If that is our only option to save on taxes, it would save us enough money to be worth it. Like I said, this is our first flip, so we are very new to the tax side. I would love to hear any suggestions and new advice going forward!

[Mike Dymski]

Flipping is taxed as ordinary income, not lower capital gains tax rates.

I lived in my flips and sold them tax free after two years.  I did the math and determined that I would have to flip extra properties just to cover the taxes compared to flipping one house every two years tax free.