Posted by Dave T on July 31, 2001 at 09:58:10:
Suggest you consult a tax advisor for specific details. While the question you ask is simple as straightforward, the answer is complex.
Please take my response as a gross generalization, and consult your tax advisor for detailed guidance for your specific circumstances.
In a nutshell, profit from flip property is always taxed as ordinary income at your marginal tax rate – NO MATTER HOW LONG YOU HOLD THE PROPERTY. If you are in the 28% bracket, then your flip profit is taxed at that rate.
Property used as investment rental for at least 12 months is eligible for capital gains tax treatment. The maximum capital gains rate is 20%. If you purchase the property today and hold it as a rental property for at least five years before sale, your maximum capital gains tax rate drops to 18%. If you are in the 15$ tax bracket, then your maximum capital gains rates are 10% and 8%.