Rehab Taxes 101
I have recently seen a several properties that would be ideal for rehab/sale. I am looking for advice regarding turning this into a sideline business. In particular, what are the Federal tax basics:
- would I report business related activity on a schedule C?
- how are the expenses related to rehabing captured during tax preparation?
If you establish a sole proprietorship or S-Corporation for your business, then all your income and expenses are reported on Schedule C.
Generally, for a rehab property, all of the direct rehab costs are added to the basis of the property and are not expensed separately. Your incidental costs would be expensed on Schedule C (office rent and utilities, telephone bill, travel expenses and mileage, advertising, supplies, etc.).