The announcement of the overhaul of the tax laws at the end of 2017 created some very polarized opinions. Many people did not think that the new tax laws would offer any benefits to individuals. Business owners to the new tax laws as an opportunity for growth and to create new jobs. Now that tax season is behind us, many Brooklyn property investors are realizing the many benefits the new tax laws offer. While the overhaul is a very lengthy and dry read, there are some key points to the new tax laws which specifically target commercial real estate investors.
Capital Gains for Brooklyn Property Investors
For Brooklyn property investors, capital gains have changed slightly. In order to sidestep the tax on capital gains, property owners must hold the property for three years. This is a sizable increase by two years from previous tax laws. Capital gains still have a cap of $250,000 for single filings and $500,000 for joint filings.
Pass-Through Income on Brooklyn Properties
Qualifying income is now eligible for a 20 percent deduction. Pass-through entities can use depreciable property. On the business and commercial real estate side, entities can deduct up to half of their W-2 employee wages, or a quarter of employee wages and 2.5 percent of the depreciable property’s purchase price.
Depreciation on Properties in Brooklyn
For people who do not choose to take the mortgage interest deduction, nothing really changes and timeline remain the same. For those who elect to take the mortgage interest deduction, depreciation on commercial properties increases from 39 years to 40 years. Similarly, depreciation on residential properties increases from 27.5 years to 30 years.
The Bigger Picture
The overhaul of the tax laws has changed the commercial real estate market for the better. With businesses saving more on taxes, entrepreneurs are looking to sign leases for better office space in Brooklyn, or outright purchasing new facilities. On the commercial real estate side, Brooklyn property investors are being taxed less, which means there is more capital available to improve existing properties or expand property portfolios with additional real estate acquisitions. Keep in mind that the Fed has also been increasing interest on traditional loans to offset inflation, which means taking out bank loans for commercial real estate in Brooklyn is going to be higher than in previous years.
Express Capital Financing provides accessible and affordable funding solutions for Brooklyn property investors. Contact our team today and find out why we stand out from other commercial real estate lenders in NYC.
