New administration - New taxes
With a new administration taking office in the next couple of weeks, we are expecting changes to the Tax Cuts and Jobs acts of 2017, which contains significant regulations for the real estate industry.
So, what are the most discussed tax law changes? After speaking with some CPAs, we have been able to compile a rundown with noteworthy points--
Individual income tax rates: probably one of the most discussed topics is the proposed change that could increase the top individual income tax rate back to the prior levels of 39% for individuals earning $400,000 or more.
Capital gains: there are also proposals of increasing the highest capital gains rate from 20% to 39% on anyone with income of more than $1 million.
1031 Like-Kind Exchanges: The 1031 Like-Kind Exchanges permits the ability to reinvest the gain from one property to acquire new properties, which has been possible and in place since 1921. The new Biden proposal would seek to eliminate or limit the use of 1031 Like-Kind Exchanges to high earning real estate investors with incomes over $400,000.
Tax basis at death: when a real estate asset is transferred after the death of an individual, such asset receives a set-up in the tax basis, equal to their fair market value. Under the new administration, this step-up in value may be eliminated. This will essentially create a double tax: once at the transfer of the asset and when the asset is eventually sold.
Several other topics will be subject to changes and reviews. While it is still early to know if and when these changes will in fact take place, we suggest planning ahead and discussing how this could impact your real estate investment with your CPA.
With a new administration taking office in the next couple of weeks, we are expecting changes to the Tax Cuts and Jobs acts of 2017, which contains significant regulations for the real estate industry.
So, what are the most discussed tax law changes? After speaking with some CPAs, we have been able to compile a rundown with noteworthy points
Individual income tax rates: probably one of the most discussed topics is the proposed change that could increase the top individual income tax rate back to the prior levels of 39% for individuals earning $400,000 or more.
Capital gains: there are also proposals of increasing the highest capital gains rate from 20% to 39% on anyone with income of more than $1 million.
1031 Like-Kind Exchanges: The 1031 Like-Kind Exchanges permits the ability to reinvest the gain from one property to acquire new properties, which has been possible and in place since 1921. The new Biden proposal would seek to eliminate or limit the use of 1031 Like-Kind Exchanges to high earning real estate investors with incomes over $400,000.
Tax basis at death: when a real estate asset is transferred after the death of an individual, such asset receives a set-up in the tax basis, equal to their fair market value. Under the new administration, this step-up in value may be eliminated. This will essentially create a double tax: once at the transfer of the asset and when the asset is eventually sold.
Several other topics will be subject to changes and reviews. While it is still early to know if and when these changes will in fact take place, we suggest planning ahead and discussing how this could impact your real estate investment with your CPA.