Trump Tax Changes Could Significantly Impact Commercial Real Estate (CRE)
With a potential return of a Trump administration and Republicans in control of both chambers of Congress, significant changes in tax policy could be on the horizon. These changes may have notable effects on commercial real estate (CRE), which often thrives or faces challenges based on fiscal and regulatory shifts. Let’s explore these potential changes and their implications for CRE stakeholders.
Key Tax Policies and Impacts on CRE
Making Pass-Through Business Income Deductions Permanent
The Tax Cuts and Jobs Act (TCJA) of 2017 introduced a 20% reduction in taxable income for certain pass-through entities under Code Section 199A. This deduction has been particularly beneficial to real estate investors and developers who operate through partnerships, LLCs, and sole proprietorships. Making this deduction permanent could solidify long-term planning for these entities, increasing their confidence to invest in CRE.
Mitchell Snow, partner at Adler & Stachenfeld and co-chair of the firm’s tax practice, notes that this policy is likely to resonate with the CRE sector. A permanent deduction would ensure that smaller and mid-sized investors, who often rely on pass-through entities,
Conclusion
Potential changes in tax policies under a new Trump administration could significantly impact the commercial real estate (CRE) sector. From extending or making permanent the pass-through income deductions and estate tax reductions to reconsidering SALT deductions and adjusting corporate tax rates, these measures could shape the investment landscape for years to come. While the benefits to CRE investors are evident, challenges such as legislative gridlock, reconciliation rules, and the long-term fiscal implications add layers of uncertainty. Stakeholders in the CRE industry should closely monitor these developments and be prepared to adapt their strategies to leverage opportunities or mitigate risks. Regardless of the outcomes, the evolving tax landscape underscores the critical intersection of federal policy and real estate economics.
Courtesy: ?Erik Sherman
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