After becoming the 56th President of the US, Joe Biden proposed new tax plans. Biden’s comprehensive plan has potential implications for the real estate market. Once the policies are passed, real estate investors must follow all the policies and make changes accordingly. Here is the list of the six tax plans from Biden’s campaign that affect real estate and what they imply on the investors.
1. Terminating Bonus Depreciation
Also known as the additional first-year depreciation deduction, real investors can deduct a significant percentage of a new asset immediately rather than deducting from the total useful life of the asset. Biden targets to terminate this bonus depreciation from Trump Administration’s policy, so you need to be aware of the changed strategy as an investor.
2. Reducing Tax Exemption of properties
Biden’s administration focuses on reducing estate tax exemption. Their target goal is $5 million from $11.18 million. This policy makes it compulsory for people to owe any estate tax if they pass away with more than $5 million in assets. Not just for real estate investors, this exemption affects all individuals who own valuable assets.
3. Ensuring tax incentives for reducing emission
One of the most commendable policies is granting tax incentives for Green Energy investments. It is aimed to reduce carbon emissions by suggesting tax breaks or reduced credits for those investing in green energy. Especially in residential buildings, it is a great opportunity for promoting green initiatives and saving on taxes.
4. Increased Social Security Tax
For income over $400,000, Biden aims to ensure social security tax additionally. For instance, if you annually make over $400,000, you will need to pay 12.42% tax for every dollar over the set limit. It is not for the people earning below the limit; it is important for high-income real estate investors.
5. Increased Long-Term Capital Gains Tax Rates
This also applies to high-income real estate investors. Biden proposed to raise the tax rates on long-term capital gains. It is estimated to be from 20% to 39% for people who earn more than $1 million annually. The rate is determined after accounting that the regular earned income taxpayers on their gains.
6. Granting Stimulus Check of $1,400
President Biden made a plan to combat the COVID crisis. After signing the $1.9 trillion bill for COVID relief, this policy of stimulus check is included with a set value of $1400 for those individuals who earn less than $75000. Once you qualify for the check, you are enabled to use the money for your down payment on your property purchase or renovations.
Conclusion:
President Biden’s tax plan has been processing through the system since the start of his presidency in January 2021. Even if it is hard to predict the outcome of the new policies, once these policies become law, every real investor has to follow them thoroughly. The new policies will significantly affect the real estate market, so you should be aware of the policies.
