How President Biden Count Affect Your Real Estate Taxes
As with each new president, changes to our taxes can definitely affect millions of Americans. So what is Pres. Biden's plan for Deal estate taxes? He's working on a new tax plan that will raise taxes for some and this increase could be among the most significant since the 1990s. Many real estate investors and real estate professionals are looking at this proposed plan and how it would affect them and their clients.
The tax cuts and Jobs Act from 2007 established several measures affecting property owners. There was a $10,000 cap on state and local tax deductions and a lower limit on the mortgage interest deductions. House Democrats are pushing for a repeal of the $10,000 limit on state and local deductions, which can be detrimental to homeowners in blue states with higher tax rates. Pres. Biden is proposing eliminations to many of these Tax and Jobs Act Components. Here are a few things that could affect your real estate.
Elimination of bonus depreciation.
This tax incentive let real estate investors and businesses deduct a big percentage of their purchase price of eligible assets by writing them off over their useful life.
1031 tax exchanges.
The elimination of the 1031 tax exchange could be eliminated, this is where one investment property is swapped out for another allowing the deferral of any capital gains taxes. This tax plan is been around since the 1920s and is a popular way for investors to buy and sell or trade property.
Elimination of the step-up basis.
Called the death tax, this tax would be eliminated if you are to inherit a property and then sell it the next day for its current value. Homeowners would not have to pay taxes on the gain.
Raise long-term capital gains tax rates for high earners.
Homeowners earning over $1 million per year could see their capital gains taxes increase. These homeowners would be taxed at regular income rates instead of long-term capital rates.
We could see an implementation of a $15,000 first-time homebuyer credit.
The estate tax exemption may be reduced to $5 million.
Top federal income tax brackets would go to 39.6% from 37% and could affect investors in real estate who are high-income earners.
While we don't know how Biden's tax plan will work out for everyone, it's likely that every element will go through as-is. There are few things contained in the bill that could impact real estate investors or even someone that inherits a home. This can really affect high-income earners, investors, and those worried about capital gains tax. While we might not know what's going on yet, this is a projected plan so it's important for anyone looking to buy or sell real estate, especially in the luxury real estate market, to consider carefully how they should buy and sell property over the next four years.