Top 2 Tax Strategies That Every Real Estate Investor Should Know About

All investors know that taxes can greatly impact a fix and flip profit. Without a strategy in place, the taxes on a flip can seem daunting. But don’t worry, we have good news! There are options available to real estate investors to help maintain a greater profit. Having a tax strategy in place and knowing your available resources can take your fix and flip business to the next level. ZINC is here to give you the top 2 tax strategies that every real estate investor should know about.

  • The 1031 Exchange- This is a game-changer for real estate investors. If you continuously flip properties this is a vital tax strategy to consider. A 1031 exchange is, by definition, a swap of properties that are held for investment purposes. You may have heard someone say “I’m going to 1031 this property for my next flip.” This is more or less how a 1031 exchange actually works. Diving deeper, section 1031 works by changing the form of an investment without accruing a capital gain. For example, once an investor has completed a flip, they can use this tax strategy and roll over the gains of the flip to their next flip while deferring capital gains taxes. While investors may profit off of each rollover, they will defer tax until they sell for cash. The goal of this strategy is to continually flip homes and only pay one tax at a long-term capital gains rate of 15%-20%.
  • Don’t forget ANY deductions- It is important to ensure that you take advantage of any deductions available to you as an investor. Examples of deductibles include labor costs, utilities, office expenses, materials, etc. In order to utilize this strategy, it is vital to ensure that you keep track of EVERY expense in order for them to be deducted. 

Now that ZINC has given you the top 2 expert tax strategies for an investment property, you are ready for your next flip! The next step to consider is funding. Look No further, ZINC lends up to 90% of the purchase price and 100% of the rehab. Click here to apply for one of our loan programs now!