Flippers might get taxed up to 25% in California

By: Marie Fleming

CEO Gold Bridge Capital Solutions

A bill that would massively tax house flippers and speculators who buy and sell a house within three years was moved to the Assembly Committee on Revenue and Taxation. Assembly Bill 1771, authored by Assemblyman Chris Ward (D-San Diego), would impose a 25% tax on all net capital gain from the sale or exchange of homes or properties. While the tax may be reduced if significant time has passed, those qualified taxpayers who buy and sell a house within 3 years would need to pay the tax. All revenue from the tax would go to the Speculation Recapture Community Reinvestment Fund.

The bill, also known as the California Housing Speculation Act, would also take effect immediately as a tax levy for all taxable years beginning in 2023 (if passed). As AB 1771 would result in a tax change, 2/3rds of each house would need to approve for passage.

Assemblyman Ward wrote the bill to specifically target short-term investors who buy homes and other properties, keep them for some time, then sell them at a profit a short time later. This includes house flippers, who renovate properties to sell back, speculators, who often outbid other buyers in the hopes that home prices rise significantly, and cash-only buyers.

Why though?

“Speculators are taking gobs of tens of millions of dollars out of our community through the cumulative effect of all these transactions. That’s not fair either because the people that are left struggling are people who get outbid 30 times trying to get into their home,” said Assemblyman Ward this week. “It would be an additional income tax on the profit gain from a sale that occurred within three years of the previous sale. But we’ve also seen this influx of short-term investors trying to get into the market, outbid San Diegans and Californians with all-cash offers, and drive the prices up for everyone. So, if somebody’s trying to go in there, fix up a fixer-upper and then sell it for record profits, that is distorting the market because somebody else could have gone in there, done the same and kept the home.”

Ward also cites the California Association of Realtors’ quarterly index, who found that California’s median price for a single-family home increased 17 percent to $814,5