Hello David,
Thank you for all of those details!
In terms of your 2 suggestions below, my main goal is to offset the expenses from the spec house build in the same year that the financial gain is realized when the house is sold - which would be 2023. Is this even possible given my situation?
Living in California with a progressive tax rate factors into this objective. The house is being built and will be sold in Colorado, by the way. So I'd imagine I'd have to pay any profit to Colorado - at its state tax rate (e.g., 5%) - and then pay the remaining tax difference up to whatever tax tier I fall within for California (e.g., 13%). So if I have a $100,000 profit, I'd owe $5,000 to Colorado, and $8,000 to California (13% - 5% = 8%). I'd of course still have to pay the Federal taxes too. Is this the right train of thought?
Thanks,
Jamie
"You will want to either file a return and report your expenses, or you may want to file a return and elect to capitalize (add to the spec house's cost basis) otherwise deductible interest, taxes, and other carrying costs by attaching a statement to your return indicating your election and the item or items included in the election."
