Best way to handle taxes on Flip house

[Jerry Gandolph]

Hello,

Im closing on a property today that I intend to flip for a profit. I bought the house via forclosure for $115k, will put about $20k into it and will list it for $225k. Im curious what is the best way to approach the capital gains tax and how does it work? What percentage is capital gains in NY?

[Steven Hamilton II]

Jerry Gandolph,

That property will not be treated as capital gains. It will be taxed as ordinary income at your rate and may even increase your tax bracket.

It will be taxed at the state level from anywhere from 4.00% to 8.82%. It will be taxed at the federal rates just as your wages from employment are. You will also be subject to any Social Security and Medicare on those earnings.

I highly recommend you browse some of the threads on this.

Peter Lee,

You cannot 1031 a property that you are flipping as it is inventory in the business and not considered an investment.
Also, To answer your question, you could end up with a tax bill depending upon how long you reside in the property as your basis will be carried over from the 1031 minus depreciation etc, you will also have depreciation recapture.

-Steven