New Tax Overhaul Bill Is Friendly to Commercial Real Estate

New Tax Overhaul Bill Is Friendly to Commercial Real Estate

On 07, Dec, 2017

The latest tax overhaul bill passed by Congress is a business-friendly piece of legislation – especially when it comes to commercial real estate.

Not every industry received special favor, but one area that did benefit quite a bit is commercial real estate thanks to several key provisions in the bills offered up by the House of Representatives and the Senate in their respective versions.

For starters, mortgage-interest income and rental income will both benefit from a lower tax rate, which is usually only found with long-term capital gains and other similar investments. The potential impact of this development can’t be overstated; lower tax rates mean CRE is a more competitive option for investing and sheltering money from higher tax rates that would be incurred by short-term investing elsewhere.

Real estate investment trusts (REITs) also come out winners. Thanks to the bill, REIT investors will have a drastically-lower tax rate – as low as 25 percent in the House’s version of the bill. This makes REITs and their underlying properties more attractive because there is no special pass-through provision for ordinary forms of mortgage-interest income, thanks to how REITs are not subject to a separate business tax.

Finally, the bill gives the real estate industry a better depreciation timetable, which will further help property owners with their tax bills each year.

A CRE-friendly bill will have a positive impact on the industry as a whole because it is likely to encourage more investment in commercial property. Already, the commercial scene in Birmingham has heated up as more businesses are moving back to the city center, and the same can be said of most metro areas across the Southeast.

CCIM designees are especially positioned to help clients benefit. Talk to your clients about this development and keep an eye on future developments from Washington D.C. as we head into 2017.

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