How will new tax bill affect Real Estate in NY and NJ?

The U.S. Senate and House of Representatives on Monday began the grueling process of hashing out the disparities between their tax bills — a task that will require reconciling hundreds of billions of dollars in differences.
The two versions of the legislation are a bit of a mixed bag for the real estate industry — disproportionately favoring the commercial sector over residential. Limited liability companies (LLCs) and real estate investment trusts win big under both. Homeowners? Not so much.
Heidi Learner, chief economist of Savills Studley, warned that the benefits will likely come at a cost. After all, the $1 trillion that is expected to be added to the federal budget deficit — as estimated by the Joint Committee in Taxation — will need to be made up for elsewhere.
“From the commercial front, the treatment is quite favorable,” Learner said. “But any perks could be offset by higher interest rates.”
The Real Estate Board of New York has also spoken out against the elimination of the federal deduction of state income taxes, and has voiced concerns over the impact the House’s version will have on affordable housing construction.
“The tax reform legislation under consideration contains elements that will promote economic growth and job creation,” REBNY President John Banks said in a statement. “There are several issues, however, with which we remain deeply concerned.”
Here are the issues that will most dramatically impact the real estate industry:
1. Pass-through deductions
The biggest developers and investors in New York City, Los Angeles and Miami rely extensively on LLCs and partnerships. For this reason, the increase in tax cuts for pass-through entities — which don’t pay income taxes at the corporate level — is likely a significant boon to the industry. The House version caps the pass-through rate at 25 percent, down from the current 39.6 percent. The Senate version allows such businesses to exclude 22.4 percent of their income from taxes.
“This could certainly cause a lot of people to rethink how they structure their business,” Learner said. She noted that more owners may opt to form LLCs or other partnerships to benefit from the deduction.
Real estate investment trusts (REITs) will also benefit from the lower pass-through rates, as the New York Times noted.
2. Corporate tax cuts
Both the Senate and House versions of the bill slash the corporate tax rate from 35 percent to 20 percent. The House version kicks in next year, while the Senate version starts in 2019.
3. Depreciation
The Senate bill shortens the depreciable life of commercial assets from 39 years to 25 years, meaning that the rate at which property owners can take these deductions is sped up, according to the Times. Shimon Shkury, founder of Ariel Property Advisors, says the change is a win for commercial property owners.
“The property owner has a non-cash deduction, and essentially shelters more income,” he said.
4. Estate tax
This one’s for the real estate dynasties. The Senate version of the bill would double the federal estate tax exemption levels — currently a 40 percent tax on estates worth more than $5.49 million for individuals, and nearly $11 million for married couples. The House bill would do the same until 2024, when it proposes to repeal the estate tax altogether. According to the Times, President Trump would save $1.1 billion under the House’s bill.
5. Private activity bonds
City officials estimate that the elimination of private activity bonds would mean 10,000 less affordable housing units will be created or preserved each year — in New York, that could cut the de Blasio administration’s goals roughly in half. These bonds are used to claim 4 percent tax credits each year (which yield approximately 30 percent of the cost of constructing low-income housing over a 10-year period), and are a major source of funding for affordable housing across the country.
“You would be looking at a 65 percent reduction in the production of affordable housing [nationwide],” said Chris Eisenzimmer, director of affordable development at Greystone. “It’s creating a lot of uncertainty amongst investors and owners.”
The House bill revokes private activity bonds, while the Senate version leaves them intact.
6. Mortgage and property tax deductions
The House version caps mortgage interest deductions at $500,000, down from $1 million. The Senate’s bill doesn’t change the cap on these deductions but eliminates them for home equity loans, the Washington Post reported. The Senate version has also decided to follow the House in allowing deductions on property taxes of up to $10,000.
Bonus: Private jets!
The inclusion of a tax break for private jet owners in the Senate version of the bill inspired a flurry of angry tweets and stories this month. The measure, however, actually tweaks an existing tax law to assure that private jet owners don’t get hit with a “ticket tax,” which is intended for commercial airlines, according to the Wall Street Journal. Still, the private jet owners out there — Steve Witkoff, Jeff Greene, Michael Stern and Richard LeFrak, to name a few — are probably pleased with the change.
Tags: 1031 Tax Exchanges, estate tax, Real Estate and Politics
Share
Tweet
Share
Short URL
http://bit.ly/2AZX81b

This entry was posted in General. Bookmark the permalink.

50 Responses to How will new tax bill affect Real Estate in NY and NJ?

  1. 2023 Books says:

    Hello There. I found your blog using msn. This is a very well written article.
    I will be sure to bookmark it and return to read more of your
    useful information. Thanks for the post. I will definitely return.

  2. A fascinating discussion is definitely worth comment.
    There’s no doubt that that you need to publish
    more about this issue, it may not be a taboo matter but generally
    people don’t talk about such topics. To the next! Many thanks!!

  3. I don’t know whether it’s just me or if everybody else
    experiencing issues with your site. It appears like some of the written text within your posts are running off
    the screen. Can someone else please comment and let me know if this is happening to them too?
    This might be a issue with my browser because
    I’ve had this happen before. Cheers

  4. I think that everything posted made a lot of sense. But, consider this, what if you composed a catchier post title?
    I ain’t suggesting your information is not solid., however
    what if you added a headline to maybe get people’s attention?
    I mean How will new tax bill affect Real Estate in NY and NJ?
    – is a little vanilla. You might glance at Yahoo’s home page and see how they
    write news headlines to get viewers interested.
    You might try adding a video or a picture or two to get readers
    excited about everything’ve written. Just my opinion,
    it would make your website a little bit more interesting.

  5. You actually make it seem so easy with your presentation but I find this matter to be actually something that I think I
    would never understand. It seems too complicated and extremely
    broad for me. I’m looking forward for your next
    post, I’ll try to get the hang of it!

  6. Now I am going away to do my breakfast, afterward having my breakfast coming yet again to read additional news.

  7. What’s Happening i am new to this, I stumbled upon this I’ve discovered It positively useful and it has aided
    me out loads. I’m hoping to give a contribution & help different users like its aided
    me. Great job.

  8. I like reading a post that will make people think.

    Also, thanks for permitting me to comment!

  9. bokep jilbab says:

    Nice post. I was checking continuously this blog and I’m
    impressed! Very useful information particularly the last part 🙂 I care
    for such information much. I was seeking this particular info for a very long time.
    Thank you and good luck.

  10. ini sex doll says:

    I think that is among the most significant info for me. And i’m satisfied reading your article.

    However should commentary on few normal issues, The site taste is
    perfect, the articles is in reality great : D. Excellent task, cheers

  11. This is really interesting, You are a very skilled blogger.
    I have joined your rss feed and look forward to
    seeking more of your great post. Also, I have shared your site in my social networks!

  12. Its like you read my mind! You seem to know so
    much about this, like you wrote the book in it or something.
    I think that you can do with a few pics to drive the message home
    a little bit, but other than that, this is magnificent blog.
    A fantastic read. I will definitely be back.

  13. The other day, while I was at work, my cousin stole my iphone and tested to see if it can survive a 25 foot drop,
    just so she can be a youtube sensation. My apple
    ipad is now destroyed and she has 83 views. I know this is totally
    off topic but I had to share it with someone!

  14. My brother suggested I may like this web site. He used to be entirely right.
    This submit actually made my day. You cann’t believe just how much
    time I had spent for this information! Thanks!

  15. Thanks for sharing your info. I truly appreciate
    your efforts and I am waiting for your next
    write ups thanks once again.

  16. I every time spent my half an hour to read this webpage’s posts every day
    along with a cup of coffee.

  17. I do not even know how I ended up here, but I thought this post
    was good. I don’t know who you are but certainly
    you’re going to a famous blogger if you aren’t already
    😉 Cheers!

  18. Hi! This is my first visit to your blog! We are a team of volunteers and starting a new project in a community in the same
    niche. Your blog provided us useful information to work
    on. You have done a wonderful job!

  19. Appreciate the recommendation. Let me try it out.

  20. Ashpatly says:

    buy vermox over the counter uk vermox tablets australia vermox mexico

  21. Josephcrolo says:

    medrol 4 mg coupon medrol 2 mg tablet medrol generic cost

  22. Ivypatly says:

    benicar 40 coupon generic benicar pills generic benicar hct

  23. Suepatly says:

    plavix in mexico plavix 75 mg cost plavix generic india

  24. Josephcrolo says:

    online pharmacy ventolin buy ventolin can you buy ventolin over the counter in canada

  25. DarrylLycle says:

    Don’t wait to feel better, buy Cipro no prescription and start healing now.

  26. Ivypatly says:

    proscar for sale australia proscar nz proscar uk online

  27. Zakpatly says:

    diclofenac 3 gel 100 mg diclofenac 150 mg tablet price diclofenac gel

  28. Josephcrolo says:

    super avana without prescription dapoxetine india buy buy generic dapoxetine

Leave a Reply

Your email address will not be published. Required fields are marked *