Potential tax changes coming out of Washington are being categorized as a “top financial risk” in a survey of commercial real estate industry figures by the financial information services company Deloitte.
Whereas in 2024 the topic of changes in tax policies came in at number 11 as a top concern, now that same subject is listed at number five, behind only elevated interest rates, the cost of capital, cyber risks, and regional political instability.
Tax policy changes in 2025 mean one thing: what’s going to happen to the 2017 Tax Cuts and Jobs Act, which was regarded as perhaps the most important economic initiative during the first Trump administration.
Almost certainly, notes the Deloitte survey, Front Burner Trends in Commercial Real Estate, the provision of that legislation, which is set to expire by the end of this year, “will be extended.”
But the Deloitte survey additionally notes that Trump has said that he wants to enhance the original 2017 measure, while also proposing “other tax-related policies.”
“These plans, if enacted, could have near-term impacts on the real estate industry’s financial performance,” continues the survey, “not only in the United States, but globally as well.”
Among the provisions of the Tax Cuts and Jobs Act that are of greatest interest to realtors is the reduction of the previous 35% corporate income tax rate to 21%; and the treatment of business interest payments.
On that latter topic, notes Deloitte, “the ability to add back depreciation would benefit those real estate companies that have not already elected to be excluded from the interest expense limitations as real property trades or businesses.”
“If changes are made retroactively” to the business interest payment section, “it could be cumbersome to realize the prior year benefits without additional guidance to streamline amendments.”
Similar concerns have been voiced about bonus depreciations, and a $10,000 cap on the deduction of local and states taxes in the 2017 bill.
Various reports have indicated that the Trump administration will soon launch a major effort to renew the Tax Cuts and Job Act, only this time with provisions eliminating taxes on tips, overtime pay, and Social Security benefit payments.
February 21, 2025
By Garry Boulard
Photo courtesy of Pixabay
