2021 is shaping up to be a year of changes for everyone, especially for real estate investors in Portland Oregon, and across the United States, because the Biden Administration is set to make several changes which could affect investors.
In this article we will cover several of the big changes that real estate investors could face, and we will offer you tips on how to navigate those changes ahead.
The Benefits Of The 1031 Exchange May Be Ending For Most Investors
It doesn’t matter if you own rental properties in Portland Oregon, or elsewhere nationwide, it’s more than likely that you’ve benefitted from the 1031 Exchange.
What is the 1031 Exchange? It’s a provision that’s enabled investors nationwide to defer having to pay capital gains on properties that they’ve sold in recent years simply by investing the gains from a sale of one property, into another ‘like kind’ property.
The 1031 Exchange is a provision that’s helped a wide variety of investors over the years, not just wealthy investors, but the reality is that with the Biden Administration, it’s possible that anyone who earns over $400,000 annually will no longer be able to benefit from the 1031 Exchange.
The President’s housing plan outlined a path for every American to have access to housing that is affordable, safe, accessible, energy-efficient, and located “near good schools” with a “reasonable commute to their jobs.”
To that end, Biden’s plan would invest $640 billion over 10 years, with a $100 billion Affordable Housing Fund to construct and upgrade affordable housing. This plan includes zoning laws that would promote more affordable housing around the country.
Landlords in low-income markets would certainly be impacted by the creation of cheaper alternatives for tenants in need of cheaper rent. However, it also creates new opportunities to invest in affordable housing.
The federal tax code’s state and local tax (SALT) deduction lowers federal taxes for investors in high-tax cities and states.
The Tax Cuts and Jobs Act (TCJA) limited the amount claimed as SALT deductions for tax years between 2018 and 2025. The $10,000 deduction limit is only applicable to taxpayers with a single, married jointly, or head of household filing status. The limit is $5,000 if married and filing separately.
The Biden administration is proposing increasing the SALT deduction alongside the adjusted gross income of taxpayers. The SALT cap repeal would remove itemized deductions for home mortgage interest and state and local taxes. The value of the SALT deduction as a percentage of adjusted gross income (AGI) tends to increase with a taxpayer’s income, so the proposed repeal would impact tax liability for the wealthy, particularly in high-tax states.
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