Bidens Administration and Real estate Investing

[Rayhill Haruzi]

The Biden tax plan would: (1) eliminate the $25,000 exemption from the passive loss rules for rental real estate losses incurred by middle-income individuals, (2) eliminate Section 1031 like-kind exchanges that allow deferral of capital gains taxes on swaps of appreciated real property, (3) eliminate rules that allow faster depreciation write-offs for certain real property, and (4) eliminate qualified business income (QBI) deductions for profitable rental real estate activities. 

[Joe Splitrock]

@Rayhill Haruzi it is probably good to cite your sources and everyone remember no political discussion. 

All the recent stories reporting these things have no sources, so it leads me to believe it is just rehash of the campaign plan. That information came from a high level tax budge that the Biden campaign released. They referred more generally to "real estate tax loopholes" and when asked if these things were included, the campaign said it was consistent with what they had planned. 

My point is these ideas have been floated, but are not on paper as a proposal sent to congress (yet). That could change any day and maybe you have information that it has. There are some more recent things that are on the official agenda and are worth watching. The American Rescue Plan is likely to pass in some form over the next few months.

American Rescue Plan is the $1.9T package congress is looking at now

- Extend eviction moratorium until the end of September. 

- Additional $25 billion in rental assistance on top of the $25B recently passed. 

- Additional $1400 in stimulus for people making $75K or $150K jointly with a roll off. 

- $15,000 tax credit for first time home buyers, paid at the time of closing. 

- Plan to step Federal minimum wage up to $15 per hour. This is likely to get push back in congress. A non partisan CBO study concluded this would result in loss of 1.3 million jobs. My guess is they compromise on a lower number to avoid further hurting unemployment.

Tax Reform (further out after American Rescue Plan)

- Replacing 401K deduction with a tax credit. This would harm higher wage earners who invest for tax deductions. It could result in less money flowing to the stock market as the tax benefits go away. 

- Raise corporate tax from 21% to 28%. Nobody cares about taxing corporations in theory, but everyone in America either buys from corporations, works for corporations or holds retirement in corporations. When they pay higher taxes and it affects prices, jobs and stock values. 

- All the real estate tax loophole items you mentioned would be part of this bill, if they are included. It is too early to know what will and will not be included.