Article Date:
November 2018

Word Count:



Defining “Real Estate Investor” and “Real Estate Dealer”

Let’s start with the big-time tax consequences.


Profits on dealer sales are generally subject to taxes at both



ordinary income rates of up to 37 percent,1 and


self-employment rates of up to 14.13 percent.2


In addition, dealers may not



depreciate property held for sale to customers,


use the tax-favored installment method to report their property dispositions, or


defer taxes by using the Section 1031 tax-deferred exchange on dealer properties.


Good Tax Breaks for Dealers


Tax law treats the dealer just as it does any business, and that includes some good things for tax purposes.



Dealers treat real estate selling expenses, commissions, legal fees, and advertising as ordinary business deductions.


Losses on the sale of dealer properties are not limited by the $3,000 capital loss cap that exists for investor properties.


Dealers deduct the loss as an ordinary loss.


Dealers deduct the entire loss (either immediately or over time using the new net operating loss rules that allow carryforward forever).


Good Tax Breaks for Investors


Profits on investor sales are



taxed at tax-favored capital gains rates of 20 percent or less, and


not subject to self-employment taxes.


Say you have a $90,000 profit on the sale of a property.



Dealer taxes could ... Log in to view full article.

Log in to view full article

Already a subscriber?

Email Address


Log In Send me my password

You'll be able to read the full article and get instant access to the last few issues of the Tax Reduction Letter

Not yet a subscriber?
with a money-back guarantee