Whether you’re already living in your dream home or preparing to purchase one in the Leander, Austin, or Central Texas area, understanding the tax implications of luxury real estate is essential. Luxury homes represent more than beautiful architecture and premium features—they’re major financial investments. Knowing how to leverage tax strategies can help you protect and grow your wealth.
At Mallach & Company, we’re not just here to help you buy or sell—we’re here to help you plan wisely for the future. Here are several key tax considerations for current and future luxury homeowners:
1. Maximize the Mortgage Interest Deduction
If you’re planning to finance your luxury home, the mortgage interest deduction can reduce your taxable income. For loans originated after December 15, 2017, you can deduct interest on up to $750,000 of mortgage debt. If you’re refinancing or buying a home that predates that change, the $1 million limit might still apply.
➡️ For buyers: Speak with your lender and CPA before closing to understand your long-term tax benefits.
➡️ For current homeowners: Consider whether refinancing or restructuring your loan aligns with your tax strategy.
2. Property Tax Deductions—Within Limits
Texas property taxes can be significant, especially for high-value homes. While federal tax law caps state and local tax (SALT) deductions at $10,000, it’s still worth claiming what you can.
➡️ For buyers: Understand what your estimated property taxes will be before you purchase.
➡️ For homeowners: Coordinate with your CPA to time tax payments for the best deduction opportunities.
3. Capital Gains Planning
When you sell your primary residence, you may qualify to exclude up to $250,000 (single) or $500,000 (married filing jointly) of capital gains. However, many luxury homes exceed these limits, which makes advanced planning essential.
➡️ For sellers: Consider the timing of your sale and whether a 1031 exchange or investment strategy could help offset your gains.
➡️ For buyers: Keep records of upgrades and improvements—these can help reduce your capital gains when you eventually sell.
4. Business Use of Your Home
Whether you’re working remotely, hosting private events, or exploring short-term rentals, portions of your luxury home may qualify for business-use deductions. These deductions could include expenses like insurance, utilities, and maintenance.
➡️ Buyers: Thinking of incorporating a home office or guest suite with rental potential? That may come with tax perks.
➡️ Owners: If you’re already using part of your home for business, be sure it’s properly documented and reported.
5. Charitable Giving Through Real Estate
Some luxury buyers and homeowners in Central Texas consider charitable strategies such as conservation easements or charitable remainder trusts. These options not only provide substantial tax deductions but also help leave a lasting legacy.
➡️ Buyers: If you’re purchasing acreage or unique land, ask about conservation opportunities.
➡️ Homeowners: Explore whether any part of your property could be structured for charitable benefit.
6. Energy-Efficient Upgrades
Federal tax credits are available for many eco-friendly upgrades—think solar panels, geothermal systems, and high-efficiency windows. These incentives not only lower your carbon footprint but also reduce your tax burden.
➡️ Buyers: Looking at new builds or custom homes? Ask about available energy-efficient tax credits.
➡️ Homeowners: Document eligible upgrades each year to take full advantage of the credits.
Final Thoughts from Tina
Navigating the luxury real estate market in Central Texas takes more than finding the right property or buyer—it takes smart planning. Tax strategies play a major role in long-term success, whether you’re stepping into a new luxury home or managing a property you already own.
At Mallach & Company, we’re here to guide you every step of the way—from your initial search to making smart financial decisions long after the sale. If you’re buying, selling, or simply planning for the future, let’s talk about how to align your real estate goals with smart tax strategies. Contact us today.
