BETHESDA, Maryland. The Republican tax plan recently passed by the House, has proposed major changes that can impact homeowners, real estate developers, manufacturers, and real estate investors. Whether your business or home will be affected depends on many factors. While the bill passed the House, it still must pass in the Senate and many expect it to face major challenges and hurdles. Yet, if the bill were to pass in its current form, what changes for real estate owners would proposed tax reform bring?
For one, the House tax plan cuts an important provision that has allowed homeowners to deduct interest on mortgage debt. According to the New York Times, homeowners with debts under $500,000 will still be able to take their mortgage interest deduction. However, those with higher mortgages will no longer be able to take the deduction. What does this mean?
For most homeowners, the change will not impact their taxes. Most homeowners carry debts less than $500,000. But, for homeowners and real estate mortgage holders on the east and west coast, where home prices tend to be much higher, the tax change could have a significant impact. In some cities, the median home price is $500,000, and in some areas, there are very few homes available under this value.
The real estate lobby is adamantly against ending the mortgage interest deduction because it could reduce people’s willingness to buy more expensive homes and could impact a person’s ability to afford a home.
Yet, for real estate investors who use pass through businesses, the Republican tax reform bill might be good news. According to the Washington Post, all income from pass through real estate businesses would be taxed at 25%. Critics have derided the tax bill because it serves to directly benefit Trump’s own businesses. Yet, for real estate investors and for those who own rental property, the tax reform bill could prove to be a money saver.
However, in order to benefit from the new tax breaks, real estate owners need to ensure that their holdings are structured as pass-through businesses. Selecting the right kind of business entity for your real estate holdings can make an immense difference in the tax burden you may face—today and tomorrow.
Investing and buying real estate can be a complex process. If the laws change, real estate owners will need to consider their investments and ensure that their real estate holdings are structured in a manner that will result in the best returns and savings. What can you do? Consider speaking to the real estate lawyers at The Law Offices of Michael E. Gross in Bethesda, Maryland. Our firm can review your holdings, review your current real estate contracts, and assist you with a range of real estate transactions. Whether you need to negotiate a new contract, change a deed, or form a new business entity—contact a qualified real estate lawyer today. Visit us at https://grossesq.com/ to learn more.