Rehab Taxes

billfaith profile photo

I bought a rehab last summer and have it for sale right now. I have never rented it out or anything. I am just waiting to sell it. I am thinking that I dont have to worry about mortgage interest I paid or property taxes I paid or anything like that since it doesnt make any money. Am I thinking correctly on this?

Thanks for any insight...

Comments(5)

  • NewKidinTown226th January, 2005

    How much is your profit?

    Mortgage interest and property taxes you paid are part of the cost of goods sold, reducing your taxable profit when you complete your Schedule C and Schedule SE.

  • billfaith26th January, 2005

    Thank you sir

    I have not sold it yet so I dont have a profit for 2004. I dont have to worry about that stuff for my 2004 taxes do I? But your saying that I can reduce my base cost with interest and taxes for 2005 if I sell it this year? I was thinking rehabs might not count for that and the money would just be lost. I hope I am wrong. Thanks again.

  • NewKidinTown226th January, 2005

    Mortgage interest, property taxes, utilties, and hazard insurance premiums are all examples of holding costs. When you flip the property, your holding costs and your purchase price comprise the cost of goods sold. Subtract the cost of goods sold from your sale price, and then subtract your selling costs to determine your taxable profit.

    Your CPA should be able to fill you in on all the details.

  • wadelester27th January, 2005

    i just asked my cpa that question yesterday, i cant take those expenses until my property sells, because i have another source of income, it is my understanding that if real-estate is your main source of income then its treated like a business :

  • billfaith28th January, 2005

    That was a great explanation. Thank you very much. Are you a cpa?

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