Of Flipping And Taxes

Those who churn real estate investments fast,without planning and preparation, are likely to pay the highest tax. This is because if the property is sold within three years of purchase, the short-term capital gain is calculated by deducting from the sale price the cost of acquisition, the money spent on improving the property and the transfer cost.This gain is included in the taxable income for the year the money is received and taxed according to the person’s tax slab and can be calculated using free tax calculators.

An investment gone wrong will result in a short-term capital loss.Short-term loss from sale of a property can be set off against capital gain from any other short- or long term asset during the financial year.

The option of setting off short-term loss against capital gain is a big advantage here.It helps reduce tax outgo.If the current year’s capital gain is inadequate, the net capital loss can be carried forward for eight financial years for adjusting against any gain.