Tax On Inventory Property
I have a substantial increase in my income this year over last year and invested it all in real estate. What is the tax rate on inventory property held for more than 12 months either to be sold or improved at a later date. Do i have to pay income tax on that individual income, Or will it be taxed on the inventory rate. I live in Florida
In my experience there is no inventory tax on real estate in Florida as such, no matter how long you hold the property.
There are property taxes, of course, assessed by the County Tax Assessor.
Income taxes will be due and payable after you sell the property and show a profit. Or have rental income.
[addsig]
I read in an earlier post that real estate purchased is taxed just like a regular business with inventory, it is considered income as the funds had to come from somewhere to purchase the inventory i just needed somebody to clerify this. thanks
The question specifically asked about "inventory" property, also called dealer realty.
finniganps is telling you that you should not buy the property to flip, but instead buy to hold for the production of income. Sell the property after holding at least one year and one day to qualify for long term capital gains tax treatment.
The pitfall that flippers fall into, is that the tax treatment does not change if the dealer "inventory" is sold on a lease option, even if the option period extends the holding period beyond one year. Profit on the sale is still ordinary income to the business and self-employment income taxes may still apply.
Quote:On 2005-12-22 08:14, a1reality wrote:
I read in an earlier post that real estate purchased is taxed just like a regular business with inventory, it is considered income as the funds had to come from somewhere to purchase the inventory i just needed somebody to clerify this. thanksa1reality,
When you are acting as a dealer to real estate, there is no federal income tax on your inventory. If you look at Schedule C, your inventory is not considered acquired until the year of sale.
Thus, by default, you have no inventory at the end of the year to tax (regardless of the date of actual purchase).
Thank you for all your responses and suggestions. I will hold and lease for 12 months.