Since January 1, 2023, a federal residential property flipping rule applies to people who sell a home within a year of buying it.
How the Rule Works
- If you sell a housing unit — or the right to buy one, such as a pre-construction assignment — that you owned for less than 365 days, the profit is treated as business income and is fully taxable, rather than as a capital gain that is only 50% taxable.
- The principal residence exemption cannot be claimed on a flipped property, even if you lived in it.
- If you sell at a loss, the loss is denied.
- Owning a property for 365 days or more does not automatically make the profit a capital gain. If you bought with the intention of reselling, or buying and selling property is your business, the profit can still be business income.
Exceptions
The rule does not apply if the sale is mainly because of one of these life events:
- Death of the owner or a related person
- A new member joining the household (for example, the birth or adoption of a child, or caring for an elderly relative)
- Separation or divorce
- A threat to the personal safety of the owner or a family member
- Serious illness or disability
- A move for work
- Involuntary loss of employment
- Insolvency
- Destruction or expropriation of the property
Whether a sale fits an exception depends on the facts, and you may need documents to support it. If you are selling within a year of buying, please consult us first — we'll advise based on your circumstances.