Tax refund season is here, and it could be a great thing for the MI real estate market.
Last year over 111M tax refunds were issued. This year the IRS says it expects over 70% of taxpayers to get a refund. Where will it be spent?
Tax refunds have often been splurged on consumer goods and repaying loans. Car dealers love this time of year, when consumers are flush with cash for down payments on new rides. A BankRate.com survey
shows 6% of those receiving a tax refund plan to blow it on shopping sprees or vacations. 27% say they will pay down debt like student loans. 29% intend to use and refund money on the basics like food and keeping the lights on. However, this year 34% of Americans say they plan to invest or save their tax refunds in 2017. Very few Americans have any meaningful amount of savings. Higher interest rates and housing costs continue to be growing faster than wages. More are becoming more educated about the tax benefits of living on investment income versus earned income. Real estate stands out as one of the best investments for achieving this.
Of course, many higher income earners, business owners, entrepreneurs, and boomers won’t be getting tax refunds. Many will owe the IRS. Those not getting a refund and worried about finances in retirement, and the high price of stocks may step up to self-directed IRAs. These tax saving vehicles can empower individuals to invest in real estate and keep all the tax advantages of a 401k or IRA. More are also becoming increasingly aware of tools like 1031 exchanges which can be used to defer taxes on real estate gains while growing an investment portfolio. This may all fuel more MI real estate transactions as individuals and families get serious about minimizing taxes, and maximizing their finances.
Even among renters, tax refunds may put them back on track with rent, or help them move up. That’s good for MI landlords and investors too.
How will you spend or invest your tax refund in 2017?