House Flip under LLC in Texas - expenses??

[Badjiannr]

Hello,

I created a LLC to flip houses (in Texas). Do you have to declare the expenses/investment every year or only when you sell the property to calculate the value added? 

The LLC is used only to flip the house so I guess I am considered as an dealer and not an investor. 

Thanks

[NateTheGrEAt · Accepted solution]

Hi @Badjiannr - thanks for writing in today. 

As a repeat flipper you are correct that you would be considered a dealer. Your purchase of a house and all expenses (such as labor and materials) used to improve that house are capitalized, meaning they are not deducted as current expenses. They are netted against the net sales proceeds when the house is sold, and you pay tax on the difference. 

Business expenses for the LLC that do not relate to a specific property can be deducted currently. For example, bank fees for the LLC account, or the purchase of a computer that is used for the business.

I hope this helps answer your question!