Top 3 Tax Deductions for Fix & Flips

Top 3 Tax Deductions for Fix & Flips

Fix and flip investing can be profitable—but the IRS wants its cut, and if you’re not careful, taxes can eat away at your margins.

At Whitestone CPA, we specialize in real estate tax strategy and work with dozens of fix & flip investors across the U.S. Here are the top 3 tax deductions you should be taking advantage of to legally lower your tax bill.

1. Cost of Goods Sold (COGS) – Materials, Labor & Contractors

When you buy a property to flip, all the direct costs of improving and selling the property can be deducted against your revenue.

This includes:

• Construction materials
• Contract labor and subcontractors
• Permits and inspection fees
• Dumpsters, landscaping, and staging
• Closing costs and title fees

Pro Tip: Keep clean, itemized records by property. Using QuickBooks or a spreadsheet helps you track what goes into each flip so you don’t miss deductions at tax time.

2. Business Expenses – Marketing, Software, Travel

Beyond the hard costs of the flip itself, don’t overlook your general business deductions.

These can include:

• Real estate investing software (PropStream, BatchLeads, etc.)
• Direct mail or bandit signs
• Cell phone or internet (if used for the business)
• Office supplies
• Travel expenses when visiting flip properties

Remember: These are still deductible even if the flip doesn’t close in the same tax year—because they’re business operating expenses.

3. Entity Tax Strategy – S Corp or LLC

Many fix & flip investors operate as sole proprietors without realizing how much tax they could save through an S Corporation.

If you’re flipping 3 or more properties per year, this strategy could help you:

• Reduce self-employment tax
• Pay yourself a reasonable salary
• Distribute remaining profits at a lower effective tax rate

Important: You must file S Corp election (Form 2553) on time to use this strategy. We can help with this.

Don’t Let the IRS Flip Your Profits

Fix & flip taxes are complex. You don’t want to find out in March that you owe thousands more than expected.

Book a Free Real Estate Tax Consultation with Whitestone CPA and we’ll walk you through:

• How to structure your entity
• What you can deduct this year
• How to plan ahead for your next flip

Questions?

Whether you’re flipping your first house or your fiftieth, we’re here to help. Let’s keep more of your hard-earned profits in your pocket.

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