I'm a house flipper but my home won't sell till next year but I 1099-nec my subs so I deduct that contractor labor expense this year or next?

[anotherdude]

I understand cost of goods sold but how does all that lump expense factor next year if I show $0 income but $16k in 1099 nec this year. Do I just add that labor when I sell or still put in subcontractor non-employee labor work this year? (with eiled 1099s)

[Vanessa A]

It depends.  If you are actually in the business of flipping houses, then your contractor expenses would be included on your return as an expense on Schedule C in the year you paid the contractors.  Your houses would be listed as inventory on your return. If this is your first flip and you are just testing the waters, then you would not report on Schedule C as a business.  

If you are not considered to be in the business of flipping houses, (ex. this is a one time deal that you are doing) then the amounts you pay to the contractors would be added to the cost basis of the house when you sell it. You would NOT deduct the money you paid to the contractor this year.  You would wait until you sell the house.  This would apply if you are only doing this one time.  Then your income and expenses would be reported on Schedule D in the investment section of TurboTax.

Read the post by Hal-Al in this link for more information. 

[anotherdude]

Hi Vanessa

No, I flip houses as inventory, but I also do rentals, and home improvement all separate entities.  Typically when I'm doing my 1099s that year I have sold some property so I deduct all the expenses in cost of goods sold whereas this year is where I started the flip remodel in 2024 but it will be finished and sold in 2025. 

So what I want to know is it just a carry over loss if for X company I didn't sell a house but I did show I efiled 3 1099-nec and posted contract labor expense and will that be deducted still when I put that house as inventory subtracting all my expenses that went with it. 

[AmeliesUncle · Accepted solution]

Keep the expense in Cost of Goods Sold.  That effectively will mean you won't get the deduction until that property is sold.

[anotherdude]

well this is the logical answer I was thinking. I just efile the 1099s the year they were paid but deduct it on the flip in the year I sell it. Hopefully all this is right.