Income tax considerations associated with real estate are a natural byproduct of buying, operating and selling properties. The skill with which a deal is legally drafted and closed may help ensure that real estate tax laws are working for you instead of against you. An experienced Houston real estate tax attorney can help clients navigate real estate taxes as they relate to acquisitions, planning, development, expensing, and like-kind exchanges, while providing peace of mind that transactions are conducted with the client’s best interests in mind.
Areas Our Houston Real Estate Tax Attorneys Can Help With
If a business or investor is interested in acquiring a desirable property, it is also essential that the transaction support their interests. While a real estate property can seem like a dream find in appearance or location, without the proper details worked into a transaction, the deal has the potential to be less than beneficial for the purchaser. Coordinating with brokers, title companies, lenders, surveyors, municipal authorities and the transactional parties is necessary to close a deal.
Some of the ways in which a real estate tax attorney and counselor at law can assist with the details of acquisition sales can include:
- Drafting Earnest Money Contracts
- Conducting underwriting analysis
- Repairing title defects
- Making offers via letters of intent
- Ensuring tax efficient transactions
- Offering final bids and submitting purchase and sale agreements
- Closing deals
- Enforcing contracts
- Executing due diligence processes including zoning, surveys, and titles
Commercial real estate attorneys should not only be well versed in the real estate transaction process and related taxes, but must also know how to expertly work them to a client’s advantage.
Real Estate Tax Planning
As with most sales, the sale of real estate also involves taxes. However, the stakes can be higher with real estate tax as they typically deal with larger price tags. In addition to the money being spent on an acquisition, the related taxes can add up. These can be expensive and could negatively impact a sale without proper legal guidance.
No acquisition should be entertained without trusted legal advisement on real estate tax planning considerations such as:
- How to understand potential pitfalls of real estate taxes
- How to maximize depreciation deductions
- How to maximize tax benefits
- How to minimize tax costs
Legal representation frequently helps clients make the most of acquisitions and real estate deals by ensuring real estate taxes do not undermine a buy.
Real Estate Development
Beyond assisting with the acquisition and the planning associated with commercial real estate, an experienced real estate tax attorney and counselor at law should also be able to help with a property’s construction, development, and management.
Some of the ways that a Houston real estate tax attorney may be able to help with the development of a property can include:
- Getting the proper permits
- Dealing with mineral and water rights
- Addressing environmental concerns
- Developing construction and design contracts and other agreements
- Drafting construction contracts
- Defending against adverse lien claims
- Drafting lease agreements
Whether a client is looking to develop an office building, apartment complex, warehouse, or shopping center, a real estate tax attorney can provide the client with the knowledge required to do so properly via a legal process.
Real Estate Expensing
Businesses that own rental properties may be able to use depreciation deductions over time. However, a legal expert with an intimate knowledge of expensing may be able to accelerate depreciation deductions.
Section 179 of the Tax Cuts and Jobs Act passed in 2017 allows for eligible improvement property to be deducted sooner rather than later. The act also allows expensing for certain lodging related depreciable tangible personal property. This may include improvements to nonresidential property such as security systems, HVAC systems, and fire protection.
If a company has questions about expensing, it is recommended to seek legal counsel familiar with the practice as well as related legislation.
According to the Internal Revenue Service, a like-kind exchange is when a real property used for a business or investment is exchanged for another business or investment property that is relatively the same or is considered “like-kind.” These properties need only be the same in general character, not in grade or quality. When done properly, a like-kind exchange of property may not require an entity to register a capital loss or gain under a 1031 exchange.
The Tax Cuts and Jobs Act passed in 2017 mandates only exchanges of real property are allowed and therefore excludes exchanges of personal or intangible property. Beyond this restriction, the wording of a like-kind exchange can be somewhat vague which can leave it open to various interpretations.
Before an entity participates in a like-kind exchange, it is recommended that they seek the services of a real estate tax attorney who can help them navigate the process to ensure it is done correctly and does not result in unexpected and devastating taxes.
If you are looking to buy or sell commercial property, do not underestimate the impact of real estate taxes. The attorneys and counselors at law at Harold “Hap” May, P.C. understand the legalities of real estate taxes and how to ensure you get a fair deal.