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The Election Was Exhausting! But Here's The Good News...
Steve Nabity
Want To Invest In Real Estate But Don't Know Where To Start?
Phew… that was exhausting! I, for one, am thrilled to no longer receive campaign texts, late-night automated calls, and contribution fliers in the mail for another four years. This election in particular may have added a few more greys to my head.
All of that being said, regardless of how you feel about the election results, there’s real optimism beginning to swell that Trump will move quickly to enact (or re-enact) tax laws that can have a substantially positive effect on real estate investors’ pocketbooks.
First, investors are clamoring to see if he’ll revive the 100% bonus depreciation allowance beyond its sunset date of 2026. For real estate investors, the Tax Cuts and Jobs Act (TCJA) expanded bonus depreciation eligibility to include both new and used properties. This change made it so that investors could accelerate their depreciation by allowing them to write off a larger percentage of an eligible property’s cost in the first year it was purchased. The remainder could then be deducted over multiple years using regular depreciation methods until it ran out.
In lamens terms, this created an incredible opportunity for real estate investors to use depreciation to offset a larger portion of their personal income taxes in the first year of their investment – especially so if you receive passive income through your business or investment each year.
Most real estate investors are hopeful that Trump will not only quickly reinstate bonus depreciation back to 100%, but also make it a permanent fixture going forward.
Want To Invest In Real Estate But Don't Know Where To Start?
Next, there’s a real possibility that Trump will maintain or even reduce the capital gains tax rates once in office. This comes as welcomed news since as of recently, there have been talks of increasing capital gains taxes for high earners – something that could significantly impact real estate investors who primarily rely on asset appreciation for their overall returns.
An increase in capital gains taxes could not only hurt the returns for current real estate investments but potentially prevent future investments as well. While investors can still use a 1031 exchange to defer their capital gains taxes on an asset sale, their only other option is to realize the gains and take the hit immediately – which could be increasingly painful if capital gains rise.
As I stated before, investors are optimistic that Trump will swiftly take action that will help real estate investors. And while there are a few more potentially impactful tax changes that could come down the pike as Trump takes office, these are just a few of the ones that could immediately impact our investors.
At the end of the day, let’s just hope all of the stress and craziness that came from this election cycle creates a lot of positive outcomes – the least of which for our taxes.
