Planning for Houston's Cycles
Houston's economy rises and falls with oil and gas prices more than most American cities, and its homes and businesses face storms and floods more often than most. Good planning here takes both into account: it spreads deductions and income across good and bad years, protects cash for the next downturn and keeps property tax under control. BOMCAS works with Houston owners and families on these decisions remotely, usually well before year end.
Statewide strategies are on the Texas tax planning page; this one deals with energy cycles, property tax and storms in Houston.
Timing Equipment and Drilling Costs
Service companies and working interest owners can often deduct large amounts in the year they buy equipment or drill a well, through bonus depreciation, Section 179 and intangible drilling costs. That is valuable in a high-price year, but deducting everything at once can create losses that the business cannot use for years. We project income for the current and next year, then decide what to expense, what to depreciate over time and what to prepay.
Entity Structure and the Franchise Tax
Houston owners often hold equipment, real estate and operating companies in separate entities. That can protect assets, but each entity may file its own franchise tax report, and related entities may have to file as a combined group. Rents and management fees between them also need to be set at sensible amounts. We review the structure every few years, especially before a large contract, an acquisition or a sale.
Property Tax Protests and MUDs
For many Houston families and businesses, property tax is the largest tax they pay. Harris Central Appraisal District mails notices in the spring, and the usual protest deadline is May 15 or 30 days after the notice, whichever is later. Homestead exemptions, the 10 percent cap on homestead value increases and over-65 exemptions all reduce the bill, while MUD and other district taxes can add more than a dollar per $100 of value in newer subdivisions. Before buying in a new development, check the district rates as well as the house price.
Flood Risk and Insurance
Flood insurance premiums are not deductible on a personal residence, but they are deductible for rental and business property. Keeping an emergency fund, documenting property before a storm and knowing how disaster losses and insurance proceeds are taxed all reduce the damage when a hurricane arrives. We include these in the plan for clients who own several properties.
Equity Awards and Concentrated Stock
Employees of energy and engineering companies can end up with a large share of their savings in one company's stock. Selling vested shares over several years, donating appreciated shares to charity or a donor-advised fund and using the 0 or 15 percent long-term capital gains brackets can reduce both risk and tax.
Selling a Business
When a Houston owner sells an oilfield service company, a distribution business or a medical practice, the split between equipment, goodwill and a non-compete agreement determines how much is taxed as ordinary income. Depreciation recapture on heavily expensed equipment can be large. We review the letter of intent, the purchase price allocation and the timing before signing, and include the final franchise tax report and the community property effects for married owners.
What a Plan Covers
- Projected income for this year and next.
- Depreciation, drilling cost and prepayment choices.
- Owner pay, retirement plans and distributions.
- Property tax exemptions and protests.
- Exit, gifting and estate questions.
Houston Tax Planning Questions
Should we deduct all new equipment this year?
Only if the deduction can be used. In Houston's energy cycle it is often better to spread deductions so later years are not left with nothing.
When should I protest my Harris County appraisal?
By May 15 or 30 days after the notice is delivered, whichever is later.
Is flood insurance deductible?
Not on your own home. It is deductible on rental and business property.
How can I reduce tax when selling company stock?
Spreading sales across years, donating appreciated shares and using lower capital gains brackets can all help.
Talk to BOMCAS About Tax Planning in Houston
Plans use current books and filed business and personal returns, and are carried out through owner pay and purchase timing that affects use tax. Clear unfiled returns first, and look at Canada–U.S. rules before an international move. Statewide, we also cover business tax preparation, personal tax preparation, sales and use tax, bookkeeping, payroll, back taxes and late filing and cross-border tax, all reachable from the Texas overview.
Tell BOMCAS about your Houston business or household and we will reply with next steps and what we need for a quote. Use the contact page or the form below, call 780-667-5250 or email info@bomcas.ca. Every Houston service is on the Houston overview. This page is general information, not advice for your situation.