1. You are too flipping fast, or rather you are flipping too fast.
If you buy and sell within 365 days your gain will be taxed at between 10 and 37%. If you buy and sell after one year your gain will be taxed at between 0 and 20%. On $100,000 gain the difference is between $9,000 and $17,000. If you subtract this extra tax from each of your short-term flips, you can see how this adds up. Why not buy, renovate, rent, or lease for one year then sell? This is the more tax savvy way of real estate investing.
2. Avoid Dealer Status.
The IRS likes to go after dealers. A real estate dealer is one who is in the business of owning property with the primary intent to resale. A dealer’s rental income gets a nasty 15.3% additional tax. Also, your gains and losses will be taxed at the higher ordinary income tax rates which are almost twice your capital gains tax rate. Keep your annual sales down to one or two, hold most of your properties for a year or longer, and keep your renovation costs down.