Texas, like many states, is currently facing an economic shortfall and our Legislators are scrambling to make up the difference. There are many proposed bills being brought for consideration to try to shore up the State’s coffers. While I realize the money has to come from somewhere, an informed consumer is wise consumer.
Political party affiliations aside, as a Realtor, I am a fierce proponent of private property rights. I will be running a series of discussions about the proposed bills to share available information so that you aware of items that could negatively impact your property rights and your pocket-book.
Taxes on real estate transactions: Combined State and Local sales tax rate would be applied when a property is sold or changes ownership and on long-term leases.
This is similar to buying a car now but could come into play whether a home is bought, sold, or transfers ownership due to divorce, probate, etc. The position of the Texas Association of Realtors (TAR) is that this will actually drive down the number of transactions and potentially increase the future tax rates needed to cover earmarked expenditures, burdening both buyers and sellers and hurting the real estate market and the Texas Economy.
As a Buyer: This would certainly eat into the cash reserves for your down payment, repairs, furnishings, etc. And if your margins for borrowing are narrow, this could actually diminish the amount you can finance or size of home you can purchase.
As a Seller: This will eat into the equity or net proceeds you walk away with from the sale and could end up raising the costs of housing in your area.
As a Tenant/Landlord: One concern is what will be designated as a “long-term lease” and how much will this impact lease costs because someone has to bear the expense: landlord, tenant or both. As an investor, this could certainly impact your ROI.
What are your thoughts on this proposed sales tax item?