Proposed Tax Changes Favor Real Estate

Not surprisingly, the proposed changes in tax law favor real estate and real estate investors. Two articles caught our attention this week which help to explain how these changes will affect real estate investors. The first is from Bloomberg’s Justin Fox which explains what types of businesses utilize the “pass-through entity” structure at the heart of the proposed tax changes. By extension, it finds the most likely businesses to benefit are real estate companies. The second article from the Wall Street Journal’s Peter Grant explains what mechanisms in the proposal account for the favored status for real estate. The reduction in the tax rate for pass-through entities is a significant benefit as are the continuation of the 1031 like-kind exchange, reductions on limits to interest expense deductions, and shortening depreciation schedules. There is a long way to go before we see anything passed into law but it is important to understand the potential implications of proposed changes.