House flipper bookkeeping: job costing that survives your lender, the IRS, and the CRA

A flip is inventory, not an expense report

The biggest bookkeeping error flippers make is expensing renovation costs as they go, showing fake losses all year and a distorted profit at sale. Flipped houses are inventory: acquisition, renovation, and most holding costs accumulate in a work-in-progress asset per property, and hit the profit and loss only as cost of goods sold when the house closes. Both countries agree on the punchline — the IRS taxes flip profits as ordinary business income of a dealer, and the CRA treats flipping as fully taxable business income, not a half-taxed capital gain. No depreciation, no capital-gains treatment, no pretending.

Job costing per flip, coded like a builder

Each property gets its own project in the books — we typically use QuickBooks Online Projects with a trade-level cost code structure — so you can answer the only question that matters mid-flip: am I still on budget? Costs post against the code the estimate used:

• Acquisition — purchase price, closing costs, title, inspections, wholesaler fees.
• Hard costs by trade — demo, framing, roofing, electrical, plumbing, HVAC, finishes, landscaping.
• Soft and carry costs — loan interest and points, property taxes, insurance, utilities, permits during the hold.
• Selling costs — staging, commissions, seller concessions, recorded at sale.

Budget-versus-actual by code, refreshed weekly, is how a 12-week flip stays a 12-week flip. Receipts flow in through Dext from your phone at the job site, because a materials run that never gets photographed becomes a cost that never gets costed. Change orders get their own budget lines the day they are approved, so scope creep shows up in the numbers before it shows up at closing.

Draws, holdbacks, and lender reconciliation

Hard-money and private lenders fund flips through inspection-based draws, and the loan ledger goes wrong fast without discipline. We track the committed facility, each draw request against the draw schedule, the interest reserve as it burns down, and points and fees capitalized into the project. On the payables side, retainage withheld from contractors — commonly 5% to 10% until punch-list completion — sits as its own liability per contractor, released only when the work passes. Ontario builders know this as the holdback habit; US projects run on the same logic through contract retainage and lien waivers.

Contractor invoices are a paper trail, not just a cost

Every US subcontractor relationship starts with a W-9, because payments of USD 600 or more in a year generally require a 1099-NEC each January — and you cannot file it without the tax ID you forgot to collect in March. We match invoices to draw requests and lien waivers so nothing is paid twice through a change order, keep certificates of insurance on file, and flag the classification questions early. Canadians used to T5018 reporting for subcontractors will find the US mirror familiar in spirit and different in every detail — and cross-border crews raise their own issues, covered in our US house-flipping tax guide for Canadians.

WIP across projects, and across currencies

Run three flips at once and entity-level profit means nothing — the books must show WIP, budget position, and projected margin per project, plus which properties are consuming cash. A clean WIP schedule is also what your tax filings are built from: US federal and state returns need cost of goods sold per property sold, and the CRA needs the same profit restated in Canadian dollars for the T1 or T2.

For Canadians there is a second axis: you fund deals in CAD, spend in USD, and repatriate in CAD. We record capital you inject at the transaction-date exchange rate, keep project costs in USD, and measure the true CAD return per flip after currency movement — which is often meaningfully different from the USD margin the closing statement suggests. If you flip through a US entity, the books also track cross-entity funding cleanly, because sloppy intercompany balances are what turn a structuring question into an audit problem. The same portfolio discipline applies when your money is passive instead of active; see how we run books for syndication investors.

Source: IRS — About Form 1099-NEC, Nonemployee Compensation.