Tax Reform & Real Estate Businesses
On December 22, 2017, President Trump signed sweeping tax reform legislation, the Tax Cuts and Jobs Act (TCJA). Following are summaries of some of the key provisions affecting the real estate industry. Commentary is in italics. All section references are to the Internal Revenue Code of 1986, as amended through the TCJA.
Overall, real estate businesses fared well in the TCJA. They should be able to claim the new 20% passthrough deduction; they can claim business interest, with some limitations; and like-kind exchanges are preserved. Their owners will be taxed at lower rates, but as a tradeoff, managers and investors may not be entitled to claim all of their net losses on their individual returns and they may not be able to enjoy the full benefits of the 100% expensing provision.
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