With all of the hot house-flipping shows on TV these days, some San Antonio-area home buyers might be considering scouting out their own run-down properties to lovingly restore. And why not? From a tax standpoint, turning a fixer-upper into your family’s dream home can generate huge tax-free profits. If you know your way around a toolbox and how to tell the bad houses from the good ones, there are serious tax rewards to be reaped from buying, renovating, and selling a fixer-upper home.
Thanks to section 121 of the Internal Revenue Code, you could qualify to exclude up to $250,000 in profit from tax, as long as you own and live in the house for two of the five years before closing the sale. That figure doubles for married couples filing jointly, allowing for up to $500,000 of tax-free profit.
While this tax enticement is available to all home sellers, it’s an especially sweet deal for shrewd home shoppers who buy at bottom dollar, take on upgrades, and then resell the house for much more than what they spent. In as little as two years, you could be looking at tax-free earnings of up to a half million dollars.
It’s important to keep location in mind when choosing a promising fixer-upper. The properties that turn the highest profits are often those in appealing communities with solid structural elements and mostly superficial deficiencies. After all, cosmetic repairs alone can often add at least $2 in market value for every $1 invested. That means you stand to double your money on affordable improvements such as new flooring, paint, fixtures, cabinet refinishing, and landscaping.
If you know how to spot a house with true potential, and you don’t mind living in the property while the remodeling is going on, all of that sweat equity could pay off handsomely at sale time. To learn more about one of the best tax opportunities in real estate, put in a call to Pro Tax Resolution We’re your source in San Antonio for information on fixer-upper tax shelters!