23rd Nov, 2012

How 2013 Tax Rates Play in Texas Real Estate Market

Today we summarize some of the effects of tax rates upon the real estate market in Texas.  No matter what Congress chooses to do in the next 36 days, invariably residents of Fredericksburg TX homes, Texas ranchers and all players in the Texas and Gillespie County real estate markets will be adjusting to changes.

Several different taxes simultaneously push in on the 2013 wallets.

  1. Tax rate on ordinary income stemming from the tax cuts enacted in 2001 now expiring.
  2. Capital gains taxes increase
  3. Alternative minimum taxes and other tax credits
  4. Tax hikes directly affecting real estate markets

Texas and Hill Country real estate agents could be impacted by all four of these tax increases.  The first three have to do with personal income taxes.  As independent contractors, real estate agents will be subject to higher self-employment taxes.  Successful real estate agents who sell high-priced Texas Hill Country properties will be subject to higher taxes on the profits.  According to “Taxmageddon” by Jerrold J. Stern, “real estate investors will be subjected to higher capital gains taxes.”  Stern explains that some real estate rental income will be subject to the 3.8 percent surtax.  There may also end up with fewer home mortgage interest and real estate tax deductions.  The list continues.

Another tax exemption is expiring.  It has to do with foreclosures on personal residences.  Without the exemption, homeowners whose properties are underwater and have lost value would be expected to pay taxes on portions of their mortgages which were forgiven by lenders.

Estate taxes will be hiked to 55 percent for estates over $1 million.  It has currently been 33 percent on estates over $5 million.  “Taxmageddon” explains.  “According to the Research Institute of America, a $5 million where property left to heirs in 2012 would escape tax entirely whereas the same bequest in 2013 could generate an estate tax as high as $2 million.”

Taxes affecting real estate all add up.  The write-off for qualified leasehold improvements, retail improvements, and restaurant property is set to be pushed back from 15 years to 39 years in 2012.  The mortgage insurance premium deduction, deductions affecting environmental contamination cleanup, the credit for energy-efficient home construction, and the credit for small home-energy credits are all on the table.

Some of the tax changes are already in effect and others take effect in 2013.  Without specific legislation, the taxes spoken of here could very well unbalance households and professionals in the real estate industry.

To find out about Texas Hill Country homes and ranches for sale, please call Dale E. Cook, MBA and owner of SAGE – Premium Texas Real Estate in Fredericksburg at (830) 992-0056.

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