Some real estate insiders are worried a Republican overhaul of the tax system could damage the industry.
In June, Republican federal lawmakers proposed a tax reform, and lobbyists told the Wall Street Journal that it stands a decent chance of passing now that Donald Trump is set to occupy the White House. “The House is ready to roll,” said Jeffrey DeBoer of the Real Estate Roundtable.
But despite Republicans’ tax-cutting credentials, some worry that the proposed changes could plunge the real estate industry into turmoil. For example, the plan would double the standard deduction available to taxpayers, which would take the teeth out of the mortgage interest deduction (an itemized deduction) and lessen the tax advantage of buying a home.
“Because of the other provisions included in the new tax system, far fewer taxpayers will choose to itemize deductions,” the Republican proposal reads.
The plan would also scrap a provision that allows companies to write off property depreciation over time. Buyers of apartment buildings can depreciate the cost over 27.5 years, with other commercial real estate being written off over 39 years. Instead, firms would be able to record the price of buying a property as a one-off business expense.
Real estate insiders worry that such changes could harm investors who bought properties under the assumption that the old tax rules would remain in effect. “The transition rules are really, really critical,” DeBoer said, according to the Journal. [WSJ] — Konrad Putzier