House flip & taxes (investment, fees, property, value)

[Newcomerm3]

Hi.

First of all I am not From America so excuse me for my bad English.

I have a few questions about house flipping and taxes.

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If someone decide to buy a house,renovate it within two weeks and sell it within the month.

Lets say that the house original cost is 100,000.After renovations its value is 200,000.

now lets say that that someone is renovating one house a month.

If the transaction is made and the house is sold for 200,000 how much money goes to goverment.

I need answers quickly and once again sorry for my English.Let me know mistakes I made.

[jdm2008]

Originally Posted by Newcomerm3

Hi.

First of all I am not From America so excuse me for my bad English.

I have a few questions about house flipping and taxes.

-----------------------------------------------------------------------------
If someone decide to buy a house,renovate it within two weeks and sell it within the month.

Lets say that the house original cost is 100,000.After renovations its value is 200,000.

now lets say that that someone is renovating one house a month.

If the transaction is made and the house is sold for 200,000 how much money goes to goverment.

I need answers quickly and once again sorry for my English.Let me know mistakes I made.

Hello Newcomerm3,

Here's is a calculator I found. I don't know if its accurate and have never used it but it looks like what your looking for.
The SmartMoney.com Capital-Gains Guide at SmartMoney.com
Not giving financial advice, just a lay person.
But I think the house is a short term capital gain, so you can plug it in that way.

[texdav]

Since it was a investment 'yes ;yuo apy capital gains tax on profits made.That doesn't mean that you pay on all the extra 100,000 as there were cost involved.

[Newcomerm3]

Call me stupid but I dont quite understand.I also read about this on other sites.

If I sell more than 3 houses a year its considered a business.That means I pay 35%(for short term)+15%(becouse it is a business).That means that I have to pay 50% of my income.

So,if I buy a house for 100,renovate it for 40 and sell it for 200.Half of it(100,000) goes to IRS.

Please if anyone can explain this to me.

[marmac]

Originally Posted by Newcomerm3

Call me stupid but I dont quite understand.I also read about this on other sites.

If I sell more than 3 houses a year its considered a business.That means I pay 35%(for short term)+15%(becouse it is a business).That means that I have to pay 50% of my income.

So,if I buy a house for 100,renovate it for 40 and sell it for 200.Half of it(100,000) goes to IRS.

Please if anyone can explain this to me.

Even if you paid 50% tax ( which you won't) half of $60,000 is only $30,000

( $200,000-----minus -------------$100,000+ $40,0000 )

[Newcomerm3]

Originally Posted by marmac

Even if you paid 50% tax ( which you won't) half of $60,000 is only $30,000

( $200,000-----minus -------------$100,000+ $40,0000 )

Thanks.I tought I have to pay 50% of everything,not just profit.

[chet everett]

Originally Posted by Newcomerm3

Thanks.I tought I have to pay 50% of everything,not just profit.

...of course when the full costs of YET ANOTHER MINDLESSLY DESIGNED ENTITLEMENT PROGRAM'S crushing costs soar out of control as craven power hungry politicians steer American into ruin while the oligarchs and kleptocrats live unbothered by reality and spew lies about "heloping the uninsured...

To stay a bit closer to the topic, there are LOTS of costs that are going to reduce one's profit and it is rare from any renovated home to really generate anywhere near 100% profit on dollars invested. The costs of pretty much EVERYTHING associated with not just the renovation of the property but financing it and marketing it are significant and help to reduce the tax burden.

If you are not familiar with how the Federal Tax codes are relatively friendly to real estate investors it is worth doing a little reading: http://www.amazon.com/Real-Estate-In.../dp/079316978X if you are a foreign nation this is helpful too http://www.irs.gov/businesses/small/international/article/0,,id=129631,00.html (broken link)

[Beena]

You came to America to flip houses? Hold on, I am gonna need a minute here.

[DMenscha]

Originally Posted by Beena

You came to America to flip houses? Hold on, I am gonna need a minute here.

With a weak dollar it wouldn't surprise me at all. What would surprise me is that anyone could put two weeks of work into a property and double it's value.

As for the capital gain, if a person spends $100K to purchase the property and spends $50K in materials then the capital gain is going to be $50K which is then the taxable amount.

[Silverfall]

Originally Posted by DMenscha

As for the capital gain, if a person spends $100K to purchase the property and spends $50K in materials then the capital gain is going to be $50K which is then the taxable amount.

Assuming they could sell it themselves. Otherwise they would have real estate fees and such.

OP, also you need to be aware that FHA and VA may require that the deed be seasoned. Meaning that they won't insure the house until the deed has been held for 90 days.

Flipping is very difficult in this market.