house flipping?

J

jimmydean007

New member
Sep 20, 2007
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howdy fine terbites, i was just wondering if anyone could direct me to some info on house flipping. as in what the taxes are, penalties for selling within the first year ect... thanks :)
 
First off, you pretty much need to make at least a 10%-15% gain just to break even after Land transfer tax (paid at purchase), legals (buying & selling), realty fees (assuming you sell through a realtor). Of course there is also carrying costs while you own it.

The only penalty would be if you arranged a closed mortgage.

If the house is not your principal residence, any net gain would be taxable. There is no hard time frame on how long you have to own and live in a principal residence to avoid a taxable gain, but if it appears this is being done to provide a source of income, you risk a nasty visit from CRA.
 
If you make a business out of flipping houses you are subject to tax on the full amount of the profit, i.e., at your marginal income tax rate. If you renovate the property for the purpose of earning rental income and then sell it for a profit the profit should be treated as a capital gain, i.e., you only pay tax on half the gain (not 50% tax but tax on 50% of the gain. If your marginal tax rate is 40% the total tax would be 20% of the gain). If you buy the property, fix it up, and actually live in it as your principal residence there is no income tax payable when you sell.

Disclaimer: Not tax advise. Consult your accountant.
 
It is my impression that if you are selling through a realtor and financing the bulk of the purchase then you will have a tough time making money, unless you are doing reno work and can get in and out in a very short time frame. To do that effectively you need to essentially possess the skillz to do as much of the reno work as possible.
 
LateComer said:
Consult your accountant.
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Better yet, consult a tax lawyer. Discussions with accountants are not legally privileged. Your accountant can be questioned and called to testify. Discussions with lawyers are privileged and confidential, provided they are held in private or where there is a reasonable expectation of privacy.
 
johnhenrygalt said:
Better yet, consult a tax lawyer. Discussions with accountants are not legally privileged. Your accountant can be questioned and called to testify. Discussions with lawyers are privileged and confidential, provided they are held in private or where there is a reasonable expectation of privacy.
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You've been listening to too many Diogari "Taxman' commercials.

client confidentiality is hardly an issue in seeking good tax advise. It really only comes into play if you are planning something illegal.
 
HafDun said:
You've been listening to too many Diogari "Taxman' commercials.

client confidentiality is hardly an issue in seeking good tax advise. It really only comes into play if you are planning something illegal.
Click to expand...

I never heard of "Diogari".

Privilege is but one aspect of the equation. But more importantly if it's tax advice you want, keep in mind that the vast majority of accountants are not tax experts.
 
live

you must live over a year in ti not to be taxed capital gain.
This is why you see Italians and others live there for 2 years, they take their time fixing it mainly in the winter and well planned chart/organization so it won't interfere with their livelihood, then sell after 2 years and do it again.
 
if you flip the house this may cause structural damage which would likely reduce the value. How selling an upside down house would impact your taxes is beyond me.
 
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