Originally Posted by bd1703
#1Say I sell the house this year for 155,000 (about the estimated value in our towns real estate market) after rennovtions are complete, what % would I play the IRS in income after the sale?
#2Also, can I deduct my labor put into the flip from the cost. Say my personal labor is valued about about 15,000, can I deduct that from profits.
#1It depends; if you own th ehouse for more than a year then your profit is considered a long-term capital gain and will be taxed at a rate of 0% (aslongas your tax rate is 15% or lower than 15%) to 15%(if your tax ratwe is higher than 15% but lower than 39,6%) 20%(if your tax rate is 39.6%), depending on your income. To determine capital gains on the sale of your home, you simply subtract your cost basis from the selling price. Cost basis not just the purchase price. It also includes certain settlement fees, closing costs and commissions associated with both the purchase and the sale (excluding escrow amounts related to taxes and insurance, etcyou can exclude up to $250k in profit from the sale of a main home (or $500k for a married couple) as long as you have owned the home and lived in the home for a minimum of 2 years. Those 2 years do not need to be consecutive.In the 5 years prior to the sale of the house, you need to have lived in the house for at least 24 months in that 5-year period. In other words, the home must have been your principal residence.
#2No your own personal labor; however, Labor costs are rolled up into the cost of the rest of the project for the purpose of figuring deductions and depreciation. The IRS considers labor costs on improvements and renovations to be a capital expense. The cost of labor must therefore be deducted gradually over the useful life of the improvement or installed appliances or equipment. This is true even if you paid for the improvement out of your own pocket rather than hiring a contractor.