Rental Property & Flip Home Tax Tips Every Investor Should Know

Here is a link to our Rental Expense worksheet that will help you categorize your rental expenses for tax time.  Fill this out and bring it with you when you bring us your taxes.

                  Rental Expense Worksheet Recommended

Build Wealth — and Keep More of It

Owning a rental property or flipping homes can be a powerful way to grow your income. But when it comes to taxes, real-estate income follows a different set of rules.
At Accounting Services of York, LLC, we specialize in helping property owners and investors make tax-smart decisions that protect profits and minimize surprises.

1. Rental Property Taxes: Income, Deductions & Depreciation

If you rent out a property, your rental income is taxable — but you also get valuable deductions that can significantly reduce your tax bill.

Common deductions include:

• Mortgage interest and property taxes

• Insurance premiums

• Repairs, maintenance, and cleaning

• Utilities you pay as the landlord

• Property management fees

• Depreciation (the “hidden” deduction that spreads your property’s cost over 27.5 years)

💡 Tip: The difference between a repair and an improvement matters. Repairs (like fixing a leaky faucet) are fully deductible, while improvements (like adding a new roof) must be depreciated.

2. Selling a Rental Property: Don’t Forget Depreciation Recapture

When you sell a rental property, the IRS requires you to “recapture” the depreciation you claimed over the years — (whether you claimed it or not)  and that portion is taxed at a higher rate than your capital gain.

This can surprise many landlords. Our team helps you calculate true net profit before selling, so you know exactly what you’ll owe — and can explore 1031 exchange options to defer taxes and reinvest in another property.

3. Flipping Homes: Taxed as a Business, Not an Investment

If you buy, renovate, and sell homes for quick profit, the IRS may treat you as a dealer — meaning your gains are taxed as ordinary income, not capital gains.

That means:

• You may owe self-employment tax.

• Expenses like materials, labor, and utilities must be capitalized until the sale closes.

• Keeping separate books for flips vs. rentals is critical to avoid IRS red flags.

💡 Tip: Many flippers benefit from forming an S-Corporation to reduce self-employment tax and organize their income more efficiently.

4. Entity Setup: LLCs, S-Corps & Tax Efficiency

The right entity structure can make a big difference for landlords and flippers alike.

• LLCs help protect your personal assets and simplify rental ownership.

• S-Corporations may reduce taxes for active flippers.

• Partnerships and multi-member LLCs can provide flexibility for joint investors.

We’ll help you choose the best setup for your goals, risk tolerance, and growth plans.

5. Year-Round Tax Planning = Bigger Returns

Don’t wait until tax season to plan. Real estate taxes can be managed strategically year-round — especially when you:

• Track your basis adjustments and capital improvements

• Monitor passive activity limits

• Time sales for lower-income years

• Stay ahead of changing IRS rules

Working with a proactive tax professional ensures you’re not just filing — you’re strategically planning for maximum return.

☕ We’ll Count the Beans — You Enjoy the Coffee!

Whether you own one rental, several properties, or are building a house-flipping business, the right tax strategy makes all the difference.
Let’s make your real-estate profits work smarter.

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