Today is November 6, 2020, three days post-Election Day. Like all of you, we anxiously wait as the results continue to be tallied in key states. Whatever your politics may be, we hope you’re all managing your stress from Election Fatigue.
How do you think the Presidential Election will impact your business in real estate? In review:
Commercial real estate has faced strong headwinds these past eight months. As a result of the COVID-19 Pandemic, the commercial real estate industry experienced unprecedented turmoil. Contracted sellers were being challenged to have their deals close and find a replacement property. With an extension in July, we did see an increase in sales leading up to the deadline.
We believe the commercial marketplace needs to see where the economy is going before it can figure out how well it will perform. We all know there are various tax benefits to real estate investors, but the IRC section 1031 Exchanges has been considered to be the “most valuable”, which is why again it has come up in discussion.
President Trump a known proponent of tax incentives for real estate investors, passed the 2017 Tax Reform bill with the benefit intact.
Biden’s tax plan specifically addresses tax breaks that real estate investors receive. Given 1031 Exchanges account for a large cost to the government in lost tax revenue per year, it is assumed to be up for elimination. If so, it would potentially raise Capital Gains Taxes on high earners.
As we inch closer to finally hear the announcement, will real estate investors think twice before selling their investment properties in a Biden Presidency? If so, there may be a temporary rise in transactions but how will that look in the long run?
Lobbyists in Washington have been effective thus far in preserving the tax incentive. These efforts are what will keep it going even in a potential Biden administration. Have your voice heard and tell your elected officials how 1031 Exchanges have benefited you, your business, and your community!