First, you will need to determine if you are a real estate investor or a real estate dealer.
Generally speaking, real estate investors purchase real estate with the intention of holding their properties and gaining a financial return; real estate dealers buy and sell real estate as part of their everyday business. It all comes down to the intent behind the property purchase. Even if you originally purchased the property to hold, but ended up selling it sooner, it does not mean that you are a dealer.
If you are a real estate investor, then the "flip" will be reported as a sale of an investment asset.
The costs of obtaining, building, or any payment to contractors will be added to the cost basis of the house and used against the sales price to reduce capital gain on the sale.
- Open your return in TurboTax.
- In the search box, search for sold second home (use this exact phrase) and then click the "Jump to" link in the search results.
- Answer Yes on the Did You Sell Any Investments in 2018? screen.
- If you land on the Here's the investment sales info we have so far screen, click Add More Sales.
- Answer No to the 1099-B question.
- On the next screen, select Second Home (choose this also for inherited homes) or Land. Click Continue.
- Follow the on-screen instructions to completion.
If you are a real estate dealer, then you will report the "flip" on Schedule C.
The sales price will be your gross income (general income in TurboTax) and basis will be your cost of goods sold. This income will be subject not only to income taxes at ordinary income tax rates, but also self-employment taxes. You will also need to upgrade your TurboTax software to Home & Business.
To enter this as business income:.
- Sign in to TurboTax.
- Type sch c in the search/find bar and click search/find.
- Click on Jump to sch c.
- Click on start/edit or Add Another Business.
- At the Your XXX Business screen:
- To enter your income, scroll down to Business Income. Click Start/Update. Click Start/Update next to General Income.
- To enter your business expenses, scroll down to Business Expenses, Other Common Business Expenses. Click Start/Edit.
- Continue with the onscreen interview.
- Is the money I made from a home sale taxable?
- Where do I enter Form 1099-S?
- I sold my rental property. How do I report that?