Your tax will depend on several factors that determine if you are in the flipping business (as a dealer) or the investment business. What the IRS will look at includes:
- whether you buy property to fix, improve, and sell it (flipping) or
- whether you buy property to hold and maybe rent it and
- how frequently you flip properties and
- how much of your total income is from flipping properties.
If you are frequently flipping properties, then the sale profits will be taxed ordinarily with your other income and separately at 15.3% as self employment income. The property will be treated as non-depreciable business inventory and the materials, supplies, and labor expenses are reported on Schedule C. Income from a house flip, for taxpayers under the income limits, will be eligible for the qualified business income deduction.
The income from the sale of properties held for an investment (or not held by a "flipping business") will be reported on Schedule D and, if held for longer than 1 year, will receive favorable long-term capital gains treatment. Income from the sale of properties held for investment for less than 1 year will be short-term capital gains and will be taxed along with your other ordinary income (salary and interest income).