How Are Profits From Flipping Houses Taxed?

The 70 percent rule states that an investor should pay 70 percent of the after repair value (ARV) of a property minus the repairs needed.

Experienced flippers target 10 to 20 percent profit of the ARV. A 10 percent profit is low and 20 percent is considered a "home run".

Profits from flipping houses are generally considered ordinary income subject to federal and state income taxes.
Capital gains taxes apply to properties held longer than a year.
Depreciation deductions can be taken for the cost of improvements made to the property.

The 70 percent rule states investors should pay 70 percent of the after repair value (ARV) minus repairs for a property.
Experienced flippers target 10 to 20 percent profit of the ARV.
Credit score matters less for flipping loans unlike regular loans. Most flippers target at least $25,000 profit per flip. 20 percent cash on hand of purchase price plus repairs is recommended before starting a flip. This helps cover unexpected repairs and ensures profit.

Flipping houses is considered a business not an investment by the IRS.
Trading profits from home flipping are considered a gambling activity and taxed at ordinary income rates, not capital gains rates.
When you flip a house for profit within 180 days, it’s considered at zero cost basis for tax purposes.