Right now, let us discuss all flips except the homeowner flip. We will cover that in another question.
First, you must decide if you are truly in the business of flipping houses, or if you are an investor who does this sporadically. The IRS calls you a dealer if you hold property primarily for sale to customers in the ordinary course of business. You are an investor if you are a passive owner of real estate for future increase in value.
Investors receive the advantage of much lower long-term capital gains tax rates, and may be eligible for tax-deferred sales called 1031 exchanges. Dealers pay taxes at their normal tax bracket percentage for ordinary income, and they must pay the self-employment tax that is equivalent to Social Security and Medicare withholding.
At the time this was written, the highest tax rates for each category were as follows:
Long-term capital gains