United State of America

Tax Reform Advances

Late last week, the Senate passed the proposed tax reform legislation that is set to have a large effect on every taxpayer. Now, the House and Senate will have to hash out reform differences. According to a recent National Multifamily Housing Council (NMHC) article, despite numerous differences between the House and Senate proposals, both leave many critical provisions relevant to multifamily intact. For example:

“Both would allow multifamily firms to continue to fully deduct business interest and engage in like-kind exchanges. Notably, the House bill also maintains 27.5-year depreciation for multifamily buildings whereas the Senate bill extends the recovery period to 30 years for firms wishing to maintain full deductibility of interest. Initially, the Senate sought a 40-year depreciation period for buildings, but NMHC/NAA were able to secure an amendment during committee markup offered by Finance Committee Chairman Orrin Hatch (R-UT) to reduce the period to 30 years. Notably, the Senate bill would require firms wishing to opt out of interest deductibility to depreciate existing buildings over an additional 2.5 years.”

One point the House and Senate differ on is the pass-through rate. Under the House’s proposed bill, multifamily firms will see a portion (30 percent or more depending on capital intensity) of their business income taxed at 25 percent. The Senate’s proposal, “individuals could take a 23 percent deduction on a portion of pass-through income that would generally be limited to a partner’s share of wages paid by the underlying business.”

These are only a few of the possible changes among a vast amount of proposed alterations to the nation’s tax code that could have an adverse effect on the multifamily industry and many others. And with the wheels still in motion and more proposal revisions to come, the aforementioned reform figures are subject to change. So if you’d like learn more detail about the upcoming tax reform and how it could effect you, your investing, or multifamily, click this link for the NMHC article and their related posts: Republican Tax Proposal Nears the Finish Line

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