Tax off flip profit

[Wyatt Reed]

I have heard that if I buy a house and flip it for a profit without keeping it for a certain amount of time I will have to pay some type of tax to pocket the money. Anyone have any good info on this? I would very much appreciate the help!

[Ashish Acharya]

@Wyatt Reed, I was just kidding. 

I have a feeling I have to share his with you.

Generally, there are two tax rates:

1) ordinary - higher rate.

2 capital gain - max 20%. May be more with Net investment Income tax of 3.8%. 

Buying and flipping house is taxed at the ordinary rate just as your W-2 income.  If you buy a property with a flip intention, profit is always taxed at ordinary rate. It doesn’t matter how long you hold. On top of ordinary tax, you will also pay self employment tax or 15.3%. There are ways to avoid part of that. Out of the scope for now. 

Buy and hold properties are taxed at capital gain rate if they are held more than a year. 

Primary residence qualify for capital gain tax rate or no tax at all if you live in the property for two year.

This might be more info than you needed but I would recommend reading few relevant post here on BP.