New Tax Law Impacts on Real Estate Owners & Investors

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  • 1031 Exchanges for real estate remain the same.
  • Capital Gains Rates remain the same (ordinary income rates changed).
  • Mortgage Interest Deduction for a primary residence or a second home is now limited to interest on debt of up to $750,000 (rather than $1 million). Interest on home equity loans will not be deductible unless the proceeds are used to substantially improve the residence.
  • Exclusion of $250,000 Gain ($500,000 for married couple) Upon Sale of Primary Residence remains the same.
  • State and Local Property Tax Deduction is now limited to $10,000.
  • Estate Taxes will apply to transferred property over $11.2 million per person (increased from $5.6 million), with no changes to the step up in basis which gives an heir a basis in inherited property equal to its fair market value at the time of the decedent’s death.
  • Carried Interest, starting next year, to get capital gains treatment, will require a 3-year holding period.
  • Pass-Through Entity Income has a basic deduction of 20% of qualifying income, with limits on the deduction depending on factors such as income thresholds, wages and the capital of the business.

Consult your tax adviser for the details.