FLIPPING PROPERTIES FOR PROFIT IN ORANGE COUNTY, NEW YORK- HOW YOU CAN MAKE MORE PROFIT FROM TAX LAWS
According to Paul Biagini an Orange County, NY based real estate expert, “the process of “flipping” in real estate in its basic involves buying a property then selling it for profit is one of the sure ways a real estate investor can make profits.”
In most cases, the real estate investor will need to improve the value of the property via upgrades, rehabilitation or renovation in order to command a premium price.
However, investors risk having a significant portion of their profits shaved off in the form of capital gains tax when you flip houses in Orange County or in any part of the country for that matter. With that in mind, Paul Biagini, Orange County suggests that as someone hoping to make maximum profits from flipping real estate in Orange County, there are ways that are fully within the ambits of law you can take advantage of to combat the huge tax bill.
When flipping properties, consider the following important point to minimize taxes and increase your profits:
According to section 1031, when you buy and sell houses as is the case with flipping business, the house is considered as “held for resale.” Therefore if you want to qualify for 1031 exchange treatment and avoid paying high taxation on the deal, you’ll have to hold the house for a minimum of a year to make it eligible for long term capital gains. To explain this, Paul Biagini suggests that “it seems the IRS wants the buying and selling phase to fall under two separate tax years.” And by holding the house for a year plus you can gain more profits from the property appreciating in value or from rents (if you rent it out).
Live in the property for two years:
Yes, by living in the property for two years in the last five years qualifies you to take advantage of the two-year rule. Note that that the occupation does not have to be sequential- a total of 730 days is all that is required to qualify. When you do this, the rule allows IRS to consider the property as you home meaning when you sell the house, your profit becomes free from been taxed.
A tweak to the two years residency rule:
There are circumstances where there is an exemption to the two-year residency rule explained above. If for some circumstances such as health, job, etc, you end up selling the property in less than two years, you’ll be expected to pay a reduced capital gain tax which can run into thousands of dollars.
Keeping records is one of the proven ways you can make more gains via reduced tax as someone flipping properties. Do this and it will come in handy when you want to claim real estate investment deductions.
During flipping, if you spend on property upgrades, the cost incurred can be used to write off your tax. To ensure you make the most of this: “keep separate bank accounts for individual properties rather than combine properties together under a single account or your investment asset with your personal account to avoid arguments and confusion with the IRS in the future” says Paul Biagini Orange County NY.
Tax laws can be very complicated, to say the least. It is therefore important as someone into flipping houses to employ the services of an accountant or a real estate expert like Paul Biagini of Orange County, NY who is adept in handling investment matters before pulling the trigger on a potential deal.