What are some interesting tax benefits for owning a house?

Question

Anyone have any interesting tax benefits that I could use in the Houston Texas real estate market or any general tax advice? Any CPA’s in the Houston area or tax advisors?

Dave Toelkes · Answer

@Alexander Reyes

For a primary residence, but only if you itemize deductions

• Mortgage interest on your acquisition debt can be deducted
• Property taxes are deductible
• Owner occupied property may qualify for a discounted property taxes
• Captial gains on sale of home are eligible for Section 121 exclusion

For an investment rental property

• Mortgage interest on acquisition debt is deductible
• Property taxes are deductible but not discounted for non-owner occupied property
• Repair costs, maintenance and upkeep expenses are deductible
• Home owner's association fees, rental license fees, and certain postage costs are deductible
• Fees paid to property manager, accountant, and attorney are deductible
• Depreciation is deductible against rental income
• Up to $25K in net losses from a residential rental activity can be used to offset other taxable income subject to certain income limits.
• Capital gains on sale are taxable but may be deferred indefinitely using a qualified 1031 exchange

Ryan Lane · Answer

Well, because you live in TX, the property tax deduction on your personal return is more valuable than it is in most states. That's because of the $10,000 SALT limit on schedule A. Where in other states this amount includes the state income taxes you pay (which by itself amounts to more than $10,000 for some people), TX doesn't have state income taxes, so the property taxes will count more towards your itemized deduction total.

The deduction is more valuable on a rental property because you can deduct the full amount on schedule E, without much limitation (subject to certain rental passive income/loss rules).

Some states/counties/localities, will provide tax rebates or credits for installing certain high-efficiency HVAC systems. So if you are ever looking to replace those pieces, I would look into that piece. Though it's not worth spending several thousand to upgrade a system that doesn't need it.

As a personal primary home, you can exclude $250,000 of gain ($500,000 if married) upon sale. But this is subject to certain rules.

There's also the 1031 exchange route to defer your taxable gain into a similar property. Again, this also has many rules. And it's important to note that it's not circumventing the tax -- you'll eventually pay the tax unless you hold the property until death.

These are fairly common strategies, but not everyone takes advantage of them properly.

Basit Siddiqi · Answer

@Alexander ReyesWill the house be your primary residence or an investment property?There are likely too many tax benefits to put into one specific post.Depreciation, no self employment taxes, exit opportunities(1031 or QOF) are the big ones for investment properties121 exclusion is the big one for primary residence.

Marlen Weber · Answer

Here are some benefits and tax advantages of buying a home: https://www.investopedia.com/a...

Alexander Reyes · Answer

@Basit Siddiqi

For right now I’m using it as a primary residence. I want to start using it as an investment property in about a year from now.

Alexander Reyes · Answer

@Ryan Lane

Awesome advice!! Very interesting! I will look deeper into this!

Alexander Reyes · Answer

@Ryan Lane

For right now it is a personal property, I want to turn it into an investment property within a year from now.

Alexander Reyes · Answer

@Cameron Tope

I was trying to get some interesting facts that not a lot of people think about it could use to their advantage as an investor.

Ryan Lane · Answer

Are you looking for tax information related to owning a personal home or a rental property?

Cameron Tope · Answer

Alexander,

Real estate tax deductions are the same regardless what state or city you're in.

Are you looking for anything specific?

What are some interesting tax benefits for owning a house?

What are some interesting tax benefits for owning a house?

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