How to avoid paying taxes while flipping homes
We were told that if you use the money you received from flipping a house and put it back into real estate you won’t have to pay any taxes on that money. Is this true?
Whats the best way to avoid paying high tax rates when flipping homes?
Buy another similar property. Talk to your accountant about 1031 exchange. You can avoid paying taxes temporarily. Which can be helpful.
The rule for a 1031E is you have to hold the property for a year. Generally flippers are looking at a faster turnaround.
Thanks for your question, Kristian. As Melanie indicated, holding the property for one year rather than immediately flipping is a best practice when engaging in a 1031 exchange. However, a 1031 exchange is an extremely popular way to defer capital gains taxes by selling an investment property and rolling your proceeds into the purchase of a like-kind property. You will eventually have to pay taxes when you sell a property without reinvesting the proceeds in a like-kind exchange but a 1031 lets you put off your tax liability, or “defer your gains,” until then.
For more information, check out our guide to 1031 exchanges here.
Best of luck,
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