Update: This story was updated on December 20 to reflect changes to the tax reform bill
President Trump has been optimistic about the many ways tax reform will stimulate the economy, make American businesses more competitive and continue the stock market’s record rise. He also said, various timethat the legislation, about to be passed by the House and the Senate, will not offer him any advantage.
During a speech In St. Charles, Missouri, in late November, the president said his wealthy friends and accountants were “going crazy” over tax reform and would lose out on rate changes and deductions. “Rich people don’t really like me,” he said.
Now that the bill is about to pass into law and analysts can get a better idea of how the Tax Cuts and Jobs Act will ultimately impact tax breaks, cuts rates and deductions, it’s clear that President Trump may not have to worry so much. pretty much as he suggested earlier.
The final package suggests that President Trump and other wealthy real estate developers (along with their accountants) will likely be to be quite happy. Here are the different ways tax reform benefits real estate moguls and big developers.
Lower taxes for intermediary companies
Intermediate businesses (partnerships, S-corporations, and limited liability companies (LLCs)) are legal entities that allow business income to “flow through” to the owner, thereby paying a personal income rate, as opposed to a personal income rate. ‘company.
The Trump Organization, which has more than 500 such entities, would see its annual tax bill drop, due to a reduction in the rate from nearly 40% to 25%. Many of the most lucrative parts of the Trump Organization’s real estate empire – rental income, royalty payments and license fees –are organized as intermediary companies.
Additionally, a last-minute change added during the reconciliation process, the so-called “Corker Kickback, would only amplify these benefits, provides a 20% deduction for so-called “transit” entities, such as LLC, LPs and S-Corporations.
Deductions for real estate development and commercial real estate breaks
The final bill also contains a number of deductions and allowances that would particularly help property developers. According to a Washington Post analysis, the tax reform would allow developers to deduct interest costs for a variety of real estate activities, including construction, management and real estate development.
Another provision would maintain the “exchange of the same nature“, an exemption which allows a company to avoid tax if it reinvests its profits in another company, except in the case of a commercial real estate development. A New York Times analysis suggested that this change would allow owners of commercial real estate to “continue to flip the properties until they die without ever paying capital gains tax”.
Elimination of the alternative minimum tax (AMT)
This mechanism put a minimum on the amount that high net worth individuals would pay, effectively limiting the number of deductions that taxpayers could claim. According to an analysis of Time from the leaked Trump 2005 tax return, the AMT increased its final tax bill by $31.2 million that year.
Additionally, doubling inheritance tax exemptions will give wealthy families the ability to pass on more assets and wealth to children, a huge tax savings for someone with significant wealth who may wish to – be passed on the family business to his heirs. Bloomberg estimated that a full repeal would save Trump more than half a billion dollars, based on an estimated net worth of $3 billion, so he will still save a lot with the current bill .
Highly valued by conservators, these credits help restore and renovate historic structures and have been a boon to urban development. The Trump Organization is currently seeking these credits to offset the $40 million in costs associated with transforming the Washington, D.C. Post Office into a Trump Hotel.