COMMERCIAL REAL ESTATE & THE NEW TAX LAWS

Miami BuildingIt has been a while hasn’t it? I have been super busy and have been neglecting the blog but not forgotten it. I am sorry. Now with the new tax laws in place it is time to blog once again. The most important takeaways are that 1031 tax exchanges survived while other types of exchanges were eliminated. 1031 exchanges allow people to sell property and buy similar property without paying taxes. Tax structures have been changed so that commercial owners benefit far more than renters now, and in many cases can avoid paying taxes entirely now. It definitely benefits huge land and property owners and their children with the altering of the estate tax. The estate tax exemption for couples doubled to $22.4 million, so those owners /  investors potentially never pay tax on their properties they already own in that price range. And they can use 1031 exchanges to buy more valuable property, and all of the capital gains are eliminated when they die, so their heirs inherit the real estate at current value, irrespective of gains. Sales tax has been reduced on commercial leases unless you live in Monroe County, and more tax cuts are rumored to be on the way. One of the more interesting elements is the reduction of state and local tax deductions for home owners. So wealthy homeowners will no longer be able to write off their large tax burdens (only $10,000), and this leads some to believe they will leave their high tax states for low or no tax states like Florida. Businesses are also affected, but not nearly as much, and could also be seeking to relocate to more tax friendly homes. Dare I say that in both cases Florida is a big winner! And we certainly can’t forget the long awaited corporate tax rate reduction from 35% to 21%. Apple alone is going to bring back $250 billion dollars to the U.S. as a result (for a mere $38 billion dollar one time charge), and then they announce 20,000 new jobs along with investing $350 billion in the U.S. by the end of 2023. Yes I would say that overall the new tax changes have been quite favorable to commercial real estate, which was already surging. 2018 looks very strong and some even say that 2019 does as well. As always thanks for reading and have a great day.

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