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justinehr18
Returning Member

Flipping houses?

A little back story, I had a full time job plus made and sold snowmobile parts online. I quit my full time job to start flipping houses. My question is, at what point do I need to do licenses, business insurance, stuff like that? Am I able to combine the house flipping with my online sales when it comes to tax time or will they need to be two different businesses?

3 Replies
Mike9241
Level 15

Flipping houses?

questions like licensing and insurance are not income taxes questions. the laws differ from state to state. even within the state different locals have different rules. 

what you are engaging in are two separate activities that need to be reported separately. if anyone is joining you in the house flipping, then likely a partnership return needs to be filed. if you elect to be treated as an S-Corp there is a return for that.  you may want to become a single-member LLC to protect against personal liability but the effectiveness of this varies from state to state. seek a tax pro who can advise you on these matters and provide other valuable information.  

tagteam
Level 15

Flipping houses?

You should consult with a local business consultant and tax professional (also, legal counsel would not hurt) with respect to licensing, insurance, and similar matters.

 

If you are operating as a sole proprietor, then you will have to report the two businesses on two different Schedules C.

 

See https://www.irs.gov/instructions/i1040sc#en_US_2021_publink24329wd0e480

Opus 17
Level 15

Flipping houses?

If flipping is an "ongoing trade or business" that you do with some regularity and a clear profit motive, then you report it on schedule C.  Because the nature of the work, income and expenses are total different from snowmobile parts supplier, you would have a separate schedule C for each business. 

 

If your flipping is not regular enough to be an ongoing business, then it is a hobby.  This changes the tax treatment of your expenses like insurance and utilities, and may change the tax on your profit (gain). 

 

Here is an IRS portal on the question of business or hobby.

https://www.irs.gov/newsroom/heres-how-to-tell-the-difference-between-a-hobby-and-a-business-for-tax...

 

Here are some Turbotax posts on the topic. 

https://ttlc.intuit.com/community/business-taxes/discussion/llc-for-house-flipping/00/2159810

https://ttlc.intuit.com/community/tax-credits-deductions/discussion/tax-issues-regarding-flipping-of...

https://blog.turbotax.intuit.com/self-employed/5-tax-implications-and-tips-if-you-flip-things-for-pr...

 

Registering as a business is a state matter, we can't really help with.  You will be taxed the same on the federal level if you are a sole proprietor or a single member LLC.  If you have a partnership with someone else (including a spouse), or if you form some kind of corporation, that can change your tax situation considerably. 

*Answers are correct to the best of my ability at the time of posting but do not constitute legal or tax advice.*
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