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How tax reform may impact commercial real estate investors

On Behalf of | Dec 20, 2017 | Commercial Real Estate |

California residents or others who own commercial real estate may get a tax break under the proposed GOP tax bill. Those who hold property in pass-through entities may receive a 20 percent tax reduction if they make less than $157,500 per year. If a couple files jointly, that limit is increased to $315,000. There are also provisions to help private firms with large holdings that may make too much to qualify for the deduction.

While the ability to pay less in taxes may seem ideal, other provisions of the tax bill could hinder growth. Some believe that no longer being able to deduct state and local taxes could be a downside to the new tax legislation. According to a representative from Time Equities, it would be preferable to have a thriving economy and a higher tax rate than a poor economy and a lower tax rate.

Prior to buying commercial real estate, it may be worthwhile to talk with several professionals. For instance, it may be beneficial to talk with a real estate agent who understands the market where an office building or shopping center is located. An accountant or financial adviser may be able to calculate the total cost of the purchase as well as calculate a potential rate of return on the investment.

An attorney may be able to help craft a purchase agreement or review one that has been presented to a potential buyer. This may help a buyer understand his or her rights and obligations under the deal. It may also make it easier to do due diligence prior to closing on the deal. If a dispute arises after the deal closes, an attorney may be helpful in resolving it in a manner favorable to their client.