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sunpacifichomes
New Member

I flip real estate for of my business. Do I use cost of inventory& cost of goods sold? I have 1099's for the sale proceeds & need to know where I input all my deductions.

Any insight as to how to input my deductions for the cost of rehabs would be great!  I know it will be on a schedule C but there are many expenses for the flips and not sure if I can lump them or must itemize each one. Can it be done through cost of good sold? Thank you!

1 Best answer

Accepted Solutions
LudwigVan_fan
Level 8

I flip real estate for of my business. Do I use cost of inventory& cost of goods sold? I have 1099's for the sale proceeds & need to know where I input all my deductions.

I'm assuming you do this on a full time basis and it is your trade or business.

See this link for general information on small business

https://www.irs.gov/publications/p334/index.html

I have copied and pasted some information from various web pages that should help

Individuals who actively purchase and remodel real estate for profit on a continuing basis. They are classified by the IRS as dealers rather than investors. For these people, the real estate is treated as inventory, rather than capital assets, and the profits on the sale of those properties are treated as ordinary income, subject to the self-employment tax.

Many expenses must be capitalized and allocated into each project, and then deducted when that project is sold.

  • The cost of the home itself
  • Direct materials
  • Direct labor
  • Utilities
  • Rent
  • Indirect labor
  • Equipment depreciation
  • Insurance
  • Production period interest
  • Real estate taxes allocable to each project

https://taxmap.ntis.gov/taxmap/ts0/publication3780tax_p_2e56b2c1.htm




**Disclaimer: Effort has been made to offer correct information; but due to the discussion forum limitations, the poster disclaims any legal responsibility for the accuracy of the poster's response**

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2 Replies
LudwigVan_fan
Level 8

I flip real estate for of my business. Do I use cost of inventory& cost of goods sold? I have 1099's for the sale proceeds & need to know where I input all my deductions.

I'm assuming you do this on a full time basis and it is your trade or business.

See this link for general information on small business

https://www.irs.gov/publications/p334/index.html

I have copied and pasted some information from various web pages that should help

Individuals who actively purchase and remodel real estate for profit on a continuing basis. They are classified by the IRS as dealers rather than investors. For these people, the real estate is treated as inventory, rather than capital assets, and the profits on the sale of those properties are treated as ordinary income, subject to the self-employment tax.

Many expenses must be capitalized and allocated into each project, and then deducted when that project is sold.

  • The cost of the home itself
  • Direct materials
  • Direct labor
  • Utilities
  • Rent
  • Indirect labor
  • Equipment depreciation
  • Insurance
  • Production period interest
  • Real estate taxes allocable to each project

https://taxmap.ntis.gov/taxmap/ts0/publication3780tax_p_2e56b2c1.htm




**Disclaimer: Effort has been made to offer correct information; but due to the discussion forum limitations, the poster disclaims any legal responsibility for the accuracy of the poster's response**
sunpacifichomes
New Member

I flip real estate for of my business. Do I use cost of inventory& cost of goods sold? I have 1099's for the sale proceeds & need to know where I input all my deductions.

Thank you for your reply. Yes, I am a full time broker and have done only 3 rehabs in 2016. So not sure if I should change my accounting method since I only did 3.
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