GOP tax reform plan could make condo developers a lot richer

Top LLC income tax rate could fall to 25%

TRD New York /
Sep.September 28, 2017 08:00 AM

Secretary of the Treasury Steven Mnuchin waving as President Trump speaks about tax reform at the Indiana Farm Bureau building (Credit: Getty Images)

The new Republican tax plan could make Manhattan’s luxury condo developers very happy.

On Wednesday, White House leaders and GOP lawmakers proposed lowering the maximum rate businesses, including many LLCs, taxed under the personal income rate pay, to 25 percent from 39.6 percent, among other changes.

Today, many Manhattan condo developers pay the top 39.6-percent rate on apartment-sale profits, while rental developers generally pay the 20-percent capital gains rate (which the tax plan wouldn’t lower). Halving the top income tax rate for LLCs would suddenly make condo development a lot more appealing relative to rental development and could lead to more of the former and less of the latter, said Kenneth Weissenberg of accounting firm EisnerAmper.

The plan still has to pass Congress and is light on details. Lawmakers said they want to install “guardrails” to make sure wealthy business owners don’t benefit from the lower LLC tax rate, but it wasn’t clear what these would look like and whether they would affect condo developers.

“Nobody really knows on this until we see actual draft legislation,” said David Spencer, a tax attorney. “It’s one of those devil-in-the-details points, details like ‘will a promote interest qualify for the lower rate’ could have a very significant impact across the real estate landscape”

But reform of this magnitude could well shake up the real estate industry. “When they make drastic changes to the tax code, behaviors change,” Weissenberg said. Take mortgages. Republican lawmakers want to double the standard deduction, which would make the mortgage interest deduction useless for most taxpayers, making it harder to borrow and buy homes.

“So yes, people may build more condos,” Weissenberg said, “but then fewer people can afford to buy them.”


Related Articles

arrow_forward_ios
(Image by Wolfgang & Hite via Dezeen)

Hudson Yards megadevelopment inspires a new line of sex toys

Cammeby's International Group founder Rubin Schron and, from top: 194-05 67th Avenue, 189-15 73rd Avenue and 64-05 186th Lane (Credit: Google Maps)

Ruby Schron lands $500M refi for sprawling Queens apartment portfolio

Wendy Silverstein (Credit: Getty Images)

Wendy Silverstein, co-head of WeWork’s real-estate fund, is out

From left: Dan Teran and Joe De Buy (Credit: Getty Images)

Two bitter rivals compete for WeWork castoff

Bel Air megamansion sells for $150M, setting LA record

Bel Air megamansion sells for $150M, setting LA record

Renderings of 1010 Park Avenue and The XI at 76 11th Avenue (Credit: CWC, HFZ Capital)

Contractor in alleged mob scandal worked on major NY projects

Global City Development principal Brian Pearl (Credit: iStock)

The $2.5B plan to lure millennials into new houses

Finger and Finger principal Kenneth Finger and landlord activist Jeff Hanley with Westchester (Credit: iStock)

Westchester group lobs its own constitutional challenge to New York’s rent law

arrow_forward_ios