Write Offs
If you buy and sell a property in less than a year you get taxed at the short term cap gains rate, which is about 35% right? But what exactly can you write off from the deal? Can you write off the money you spent rehabbing the place?
And how does that work exactly? Do you just take your cap gains say $100,000 then subtract your write offs like loan points, etc to get your taxable basis?
Thanks guys!
[ Edited by farrisb on Date 03/05/2007 ]
The money you spent to fix up the place goes into your basis (gets added to the cost of the place). Keep in mind you will probably also be subject to self employment taxes on this income (in addition to the short term capital gains rate).
Contrast this with renovating and renting it for a year + 1 day, where you will only need to pay long term capital gains taxes (15%).
But I also have carrying costs which amount to more than the incremental difference of the short term and long term tax rates in some cases.
What are all the things you can right off for taxes?
According to my CPA short-term capital gains is treated like ordinary income. So, I’m not sure where the 35% number comes from.