Real Estate Tax Incentive Options

While the age old debate of whether it is better to buy or rent when it comes to your home will likely carry on, there is no denying some of the benefits of home ownership. In addition to not having to ask for permission to do something as basic as painting a wall in your home, let alone change something more significant like the landscaping, there are several financial benefits that come with owning a property. Aside from avoiding changing monthly rental rates year to year, there are several tax related and other financial incentives that you can benefit from by choosing to purchase San Marcos real estate.

Appreciation of Investment 

One of the best investments you can make is in real estate. You have probably heard the argument about purchasing a vehicle: that the resale value drops by as much as 20% by the end of the first year you have owned it. While there are exceptions to every rule, most people experience that reality. The difference with a home is that they typically appreciate with time, meaning you will likely be able to sell your house for more than your purchase price, or it will at least maintain its original value. As stated before, there are exceptions to this rule as well as fluctuations due to the economy, market, and condition of the property, all of which have an effect on the resale value of a home. 

Capital Gains Tax Exclusion

While capital gains tax is a known thorn in the business world side, real estate does offer some immunity to it. Though capital gains tax is enforced on the profit made when assets are sold in comparison to their original value, you might be able to avoid this if you sell your property for a profit. An individual can qualify for up to $250,000 capital gains exclusion, meaning that if you sell a property for a profit, capital gains tax would not kick in until your profit reaches $250,000. A married couple can qualify for up to $500,000 capital gains exclusion, so any profit under a half a million dollars would be immune to that taxation. There are parameters and an approval process for this exclusion, but once it is approved, you are likely to save thousands in bypassing this capital gains tax. 

Depreciation Deductions

If you own a property and rent out either a room of the space you live in or the entire property, you can deduct the cost of upkeep or “depreciation” on your yearly income taxes. Because you are claiming that as income, money that you put into it is deductible which can end up giving you a healthier income tax return. 

Like-Kind Exchange

Even if you are not eligible for a Capital Gains Tax Exclusion, you might be able to get taxation relief on the profit made from selling a property by re-investing that profit into another property. Because of this 1031 like-kind exchange, both big time investors and regular homeowners can benefit by avoiding a big tax hit while still investing in their own community, the economy, and themselves.

Looking for homes for sale in San Marcos, TX? Contact The Damron Group Realtors, a San Marcos real estate agency, to speak to one of our realtors today.