How is Personal Labor Addressed with a Flip?
I purchased a second house in April of 2018, improved it and sold it in June of 2019. Since this is greater than one year I understand I can deduct improvement expenses and will be taxed at the applicable capital gains rate. I did much of the labor myself. Can I deduct my time for working on this flip? If so, at the capital or standard income tax rate?
Thanks for the question. Unfortunately, you cannot deduct sweat equity, but I would definitely advise you to talk with a tax accountant to maximize any deductions you can claim, such as materials, outsourced labor, etc. You missed the 45 day mark for a 1031 Exchange, but still talk with your accountant to see what you may be able to do to reduce your tax burden.
Here’s an article on 1031 E: https://fitsmallbusiness.com/1031-exchange-like-kind/
Best of luck.