Calculate your maximum offer price, projected profit, ROI, and holding costs — plus get IRS-approved tax strategies to keep more of your flip profits.
House flips are taxed as ordinary income by the IRS — but there are legal strategies to significantly reduce your bill. Consult a CPA before implementing.
Profits from flips held under 12 months are taxed as ordinary income (up to 37%). Hold the property over 12 months and qualify for long-term capital gains rates of 0%, 15%, or 20% — potentially saving tens of thousands of dollars on a single flip.
Active flippers are often classified as dealers in real estate, making profits subject to ordinary income tax AND self-employment tax (15.3%). Structuring flips through an S-Corp allows you to pay yourself a reasonable salary and take remaining profits as distributions — avoiding SE tax on the distribution portion.
Every expense directly related to the flip is deductible: materials, contractor labor, permits, inspections, staging, photography, marketing, and professional fees. Keep meticulous receipts. Even tools and equipment with a useful life under 1 year can be expensed immediately under the de minimis safe harbor ($2,500 per item).
If you convert a flip into a rental property and hold it for at least 2 years before selling, you can use a 1031 exchange to defer ALL capital gains — rolling profits into the next property. You must intend to hold it as a rental, not flip it, for this strategy to qualify.
If you live in the property as your primary residence for 2 of the last 5 years, you can exclude up to $250,000 in profit ($500K married) from capital gains tax entirely. This is the most powerful tax-free flip strategy available — also called a "live-in flip."
Rather than receiving full payment at closing, structure the sale as an installment sale — receiving payments over multiple years. This spreads your taxable income across years, potentially keeping you in a lower tax bracket each year and reducing your overall tax rate.
Roll capital gains from a flip into a Qualified Opportunity Zone Fund within 180 days. You can defer and potentially reduce the taxable gain — and if held for 10+ years, appreciation in the OZ fund is completely tax-free. Great for high-gain flips.
Capital losses from stocks, crypto, or other investments can offset capital gains from flips held over 12 months. Up to $3,000 of net losses can also offset ordinary income per year, with unused losses carrying forward indefinitely. Time your asset sales strategically.
The IRS classifies frequent flippers as "real estate dealers" — meaning profits are ordinary income + self-employment tax, NOT capital gains. Investors who hold property have capital gains treatment. If you flip frequently, S-Corp structure is critical to avoid the 15.3% SE tax on top of income tax. Document your intent carefully.