At the time of this writing, the GOP tax reform legislation is still trying to work its way through Congress. Of particular interest to those who might be considering building a higher-end home in the Texas Hill Country is what impact the new legislation may have on the cost of that home—or, more specifically—on how much can be deducted against income at tax time.
The current proposal limits the deductibility of mortgage interest to $500,000 (down from the current limit of $1 million) for mortgages used to purchase homes from Nov. 2, 2017, onward. Mortgages originated before then would be grandfathered in, and would only apply to principal residences. Individuals will still be able to itemize deductions for state and local property taxes, capped at $10,000.
The new plan also impacts income earned from the sale of a primary residence. Currently, taxpayers can exclude up to $500,000 for joint filers ($250,000 for others) earned through a home sale from their gross income. If the current plan passes taxpayers will be required to have owned and used the home as their main residence for five out of the previous eight years to qualify, and the exclusion could only be taken once every five years.
This is by no means a detailed look at all of the impact of the plan. It’s just a few broad brush stroke look at some of what might happen if the bill passes in its current form.
Looking Beyond the Tax Implications
While the tax benefits of owning your own home have always been attractive, investing in your own home pays a lot of dividends that go beyond the financial realm. And to be honest, you probably aren’t considering building just for the tax benefits. Sometimes it’s helpful to remember the real reasons building a luxury home in the Hill Country is a great decision. Here are a few factors you may want to review as you deliberate.
For some people, living in a well-established and clearly defined neighborhood is simply more comfortable. But there are many who head to the Texas Hill Country because they want something a little more open and unrestrained. Building a custom home on property in the Hill Country means that your home and the property around it will be unique. And instead of staring at the back of your neighbor’s house, you’ll enjoy the fantastic vistas that lured you to the Hill Country in the first place. You’ll be far enough removed from life in the city to relax and really enjoy the beauty—but still close enough to a major metro area to provide easy access to the things you need.
People who opt for a custom luxury home tend to be people who don’t settle for “good enough.” One of the advantages of custom luxury living is that things are designed and built to work and feel right. The quality of materials used in this kind of home and the attention to detail really set them apart from the semi-custom homes found in production-style developments. Quality, of course, comes from more than just using top-of-the-line materials. It begins with a great design that ensures that everything—property, layout, materials, and finishes—work together to create a home that’s solid, comfortable, and secure.
One of the most important reasons you might consider building a custom home in the Hill Country is that you intend to not only build a quality home in a great location, but a home designed and built for yourspecific needs, desires, and personal tastes. If you take a look at some of the custom homes we’ve built for clients in the Boerne area, you’ll get a sense of the quality and attention to detail that goes into each home. But you’ll also notice the individual style that characterizes each home both inside and out. You won’t find two homes that are the same.
If where you live—and what surrounds you—matters; if the quality of design and materials that go into your home are extremely important to you; and if having your home fit your personality like a glove is something you insist on, building a custom luxury home in the Texas Hill Country may just be right for you.
Those are all things that still hold true—regardless of what happens with the tax codes. Will new legislature impact what you can deduct against income in the future? We’ll know soon enough. In the meantime, don’t lose sight of what attracts you to a luxury home in the Hill Country, to begin with.
Tax information adapted from a November 7, 2017, marketwatch.com article.
Some content adapted and updated from the original August 29, 2015, post.