Do I have to pay taxes on a spec house I built and sold?

[CaitlinB1]

I never lived in the house and am splitting the profits from the sale with my in-laws, who went in halfway with me and my husband. The house is a new construction house built specifically to sell with a construction loan. Are you required to pay taxes on the proceeds of the sale of a house? It should be around $150,000 split in half. 

[Carl]

Are you required to pay taxes on the proceeds of the sale of a house?

Since you never lived in the property as your primary residence, yes you have to pay taxes on the gain.

[CaitlinB1]

What if I use some of the profits to build another house? The funds could be used on buying land, costs for construction, etc. 

[Carl]

What you use the profit/gain for doesn't matter. The gain is still reportable and taxable. It "could" be offset by any qualified expenses claimed, assuming you are "in the business" of building/selling properties. But it doedsn't change the fact that there's no "special treatment" for your gain.

[AmeliesUncle]

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@CaitlinB1 wrote:

What if I use some of the profits to build another house? 

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Is this other house for the same purpose, to build and sell?

If so, this is a Schedule C business.  That means it is subject to both income tax AND self employment tax (Social Security and Medicare taxes).

[CaitlinB1]

Yes. We will be building another house to sell it but it is not under a company or business. Just me and my husband own the land and are listed as individuals on the offer and deed. 

[AmeliesUncle]

Just because you don't have it registered as a business does not mean it is not a business.

You are regularly doing an activity on an ongoing basis with the intention of a profit.  That is a business, which is subject to both income tax and self employment tax.