USA - TEXAS Law and Practice Contributed by: Brad Holdbrook, Mary Mendoza, Michael Coleman and James Barnett, Haynes and Boone, LLP
mercial building or an individual lease space within a commercial building in Texas can be occupied, or if there are changes to an exist - ing occupancy classification, are specific and regulated by local jurisdictions. For instance, in Fort Worth, any building or structure that is to be used or occupied must have a CO, as stated by the Fort Worth Administrative Building Code. This includes when there’s a change in the exist - ing occupancy classification of a building, struc - ture, or portion thereof. Texas does not impose a VAT on the sale or pur - chase of corporate real estate. However, Texas does have a state sales and use tax on most goods and taxable services. Real estate trans - actions, particularly the sale of commercial real estate, are not subject to this sales and use tax. 8.2 Mitigation of Tax Liability Common practices include but are not limited to structuring deals in a tax-efficient manner, utilis - ing 1031 exchanges for investment properties to defer capital gains tax, and taking advantage of available deductions and credits. 8.3 Municipal Taxes Municipal taxes in Texas can include property taxes, which vary significantly across different counties and municipalities. These taxes are based on the assessed value of the property and are used to fund local services like schools, fire 8. Tax 8.1 VAT and Sales Tax
departments, and infrastructure. A common fea - ture of transactions which include real estate in Texas are agreements under Chapters 380 and 381 of the Texas Local Government Code, which permit government and quasi-governmental entities, including without limitation counties and school districts, to waive collection of assessed taxes on real and personal property held by con - tracting businesses in exchange for building pro - jects within the given locality for the purpose of creating jobs or expanding infrastructure. 8.4 Income Tax Withholding for Foreign Investors Texas does not have a state income tax, which means there is no state income tax withholding for foreign investors on real estate transactions. However, foreign investors are subject to federal FIRPTA requirements, which can include with - holding of taxes on the income generated from real estate investments and capital gains on the sale of property. 8.5 Tax Benefits In Texas, real estate owners can benefit from several tax deductions and exemptions. For homeowners, this includes the homestead exemption, which can reduce the taxable value of their primary residence. Real estate investors can benefit from deductions for mortgage inter - est, property taxes, operating expenses, depre - ciation, and potentially qualifying for a 1031 exchange which allows deferring capital gains taxes when investing proceeds into another property.
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