The Real Deal New York

Why commercial real estate owners will salivate over the Republican tax plan

Lower taxes, preservation of 1031 exchanges are great news for commercial landlords
November 14, 2017 10:10AM

Jeffrey DeBoer and Paul Ryan

There’s a lot to love in the GOP tax plan for the commercial real estate industry.

Commercial property owners would see several benefits under bills from both the House and Senate, including lower taxes on their profits and the ability to avoid a 30 percent limit on interest expense deductions, according to the Wall Street Journal. The Senate bill would also lower the commercial property depreciation period from 39 to 25 years.

“If the bill comes together as envisioned it will be a positive for the underlying economy and that’s what America needs,” Jeffrey DeBoer, chief executive of the Real Estate Roundtable, told the Journal.

The House and Senate bills would also both preserve the beloved 1031 exchanges, which let property owners avoid being taxed on profits from property sales if they reinvest those profits into real estate.

There is much less celebrating on the residential real estate side, where officials are upset over provisions such as one in the House bill that would reduce the residential mortgage debt deduction cap from $1 million to $500,000. Critics say measures like these make it less appealing for people to buy homes, especially in wealthier enclaves with higher tax rates.

Some homeowners in luxury destinations like the Hamptons are already preparing for the possibility of the new tax proposals becoming law by making plans to list their vacation properties as rentals.

The House and a Senate committee are expected to vote on the different tax plans this week. [WSJ]Eddie Small