Nov 13, 2020
Unlike any election we’ve seen before, it took five days before the media declared a winner in the 2020 Presidential Election. While President Trump has alleged voter fraud, there does not appear to be any proof that validates that claim. As it stands, Joe Biden won the election and is the President-Elect. But how will President-Elect Biden’s policies affect real estate investors? Is the 1031 Exchange being eliminated? Will bonus depreciation go away?
The change in leadership means a change in philosophy and policy. It is clear that Biden plans to roll back some of the tax breaks and benefits that were enacted through the 2017 JOBS Act under the Trump administration. According to NREIOnline, Biden proposed a 10-year, $775 billion plan to provide universal childcare and in-home elder care. According to the 10-page proposal, it “will be paid for by rolling back unproductive and unequal tax breaks for real estate investors with incomes over $400,000 and taking steps to increase tax compliance for high-income earners.”
The plan only mentions the tax once and other details are scarce, if non-existent. Joe Biden’s own website, joebiden.com offers little more detail on the taxes that impact real estate investors. However, multiple publications have reported that this plan would target three popular tax strategies: bonus depreciation, 1031 exchanges, and the step-up basis.
I discuss how these policies may impact investors and the likelihood that they may get implemented at all. In addition, Biden’s website has three other policies that I discuss including a priority to create more affordable housing, provide support to reduce evictions, and ending systemic practices like redlining that have hurt minorities.
Key insights on President-Elect Biden’s Policies on Real Estate
A top priority for President-Elect Biden is creating more affordable housing.
An eviction is truly a last resort for most property owners.
I’m less concerned about the 1031 Exchange because it’s been talked about so long and is in place, and we still have a republican senate (as of now).
If the step-up basis gets eliminated, very few heirs will be able to pay the capital gains tax.
Bonus Depreciation is set to expire in 2023 and will be harder to renew.
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