Paying taxes on Flips is it worth it as a business?

[Susan K.]

If flipping is a bad tax strategy or one of the worst RE strategies as far as taxation, how DO you make money by flipping? I have read many different posts that talk about how if your goal is to minimize taxes, flipping isn't the business to be in.

This is where I am stuck. I believe to make money you of course need to minimize your taxes. What kind of tax percentage are full time flippers paying? If my goal is to become a full time flipper am I just shooting myself in the foot at tax time? Am I just “buying” myself a job? How do I set myself up so I don’t have to give all of my profits to the government? Even with a good CPA is it worth it?

Also, with Trump’s proposed tax plan eliminating many deductions what is your opinion on how this may affect the flipping business?

[J Scott]

First, flipping is a job.  Unless you're simply partnering as an equity partner (which incurs risk), it's near impossible to completely take the job out of flipping.

As for taxes, what businesses would you otherwise consider starting, and what are the tax implications of those businesses?

Most are going to be the same.  Those that are different are unlikely to be active businesses -- they are more likely to be investing strategies, where you are paying capital gains as opposed to earning ordinary business income.

Regardless, it sounds to me like you're looking for an excuse not to get into flipping.  If that's the case, this business probably isn't for you anyway.  Good to realize that sooner rather than later.