The Biden Tax Plan - Impact to Multifamily?

[Travis Watts]

Curious to hear everyone's thoughts on the proposed tax plan from Biden and its impact on multifamily, or real estate in general. 

A couple highlights from the proposal:

#1 Elimination of bonus depreciation

#2 Elimination of 1031 Exchanges

#3 Raise long-term capital gains tax rates for high-income earners

#4 Elimination of step-up basis

#5 Implement a $15,000 first-time homebuyer tax credit

[Arn Cenedella]

@Travis Watts

It’s all speculative at this point.

I can see bonus depreciation being limited or eliminated. I don’t see that as a big deal as many people can’t use the passive losses generated by bonus depreciation anyway.

Getting rid of the 1031 would be a big mistake and would hamper the real estate market. I believe arguments can be made that would suggest the 1031 actually increases tax revenues by increased property valuations and generally increases all forms of economic activity which is ultimately taxed -  people who buy properties generally spend more money fixing them up than existing owners who often do the minimum. I believe the 1031 survives.

Taxes of all sorts will increase which actually makes the tax deductions available thru real estate investing more valuable. A dollar of tax deduction at a 20% tax bracket rate saves 20 cents. A dollar of tax reduction at a 30% tax bracket rate saves 30 cents.

A huge first time buyer tax credit may hurt rental demand.

Time will tell.