Update on Federal Tax Reform from REBNY President John Banks

At the end of last week, Congress reached an agreement on a tax bill.  This bill must now be passed by the House and the Senate and signed by the President to become law.  We expect these actions to occur this week.  Here are some highlights for the commercial and residential real estate industry:

Commercial Real Estate

  • Lowers the corporate tax rate to 21 percent down from 35 percent
  • Lowers the effective tax rate for pass-through entities (S Corporations, partnerships, LLCs and sole proprietorships) by up to 20 percent, reducing the effective tax rate to 29.6 percent
  • Like-kind exchanges for real estate is retained
  • Historic preservation and rehabilitation tax credits of 20 percent for historically certified structures is retained with some modifications
  • Carried interest has been retained, but the holding period has been extended to three years

 

Residential Real Estate

  • Mortgage interest deductions for first and second homes has been retained, but the cap has been lowered to $750,000 down from $1 million
  • Capital gains treatment for the sale of a primary residence remains unchanged
  • Private activity bonds and the low-income tax credit have been retained, which encourage businesses to invest in affordable housing
  • The threshold for the imposition of the estate tax has been doubled

 

Other Highlights

  • The top tax rate has been lowered to 37 percent and the standard deduction has been roughly doubled to $12,000 and $24,000 for individuals and married couples, respectively
  • State and local tax deductibility has been significantly reduced and capped at $10,000 among income, property, and sales tax
  • In general, the business tax reforms are permanent whereas as those which apply to individuals and families are temporary and expire in 2025.

 

> VIEW KEY POLICY HIGHLIGHTS prepared by the House and Senate Conference Committee, which negotiated the agreement between the tax reform bills passed separately by the House and Senate

> VIEW MAJOR REAL ESTATE PROVISIONS summarized by the Real Estate Roundtable

> VIEW THE TAX BILL - The changes in the tax reform bill, which is expected to be adopted this week, are numerous and complex. In addition, there are many other provisions that may impact personal circumstances.