New tax law has benefits for real estate

New tax law has benefits for real estate

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LUBBOCK, Texas -

Aside from slashing taxes, adjusting credits, and raising deductions. The Tax Cuts and Jobs Act is also going to play a prominent role in many industries. 
A big change that will boost real estate businesses is the pass through deduction.

"What is interesting is rental real estate can also see a benefit of this twenty percent deduction," said Matt Heider, tax senior with Robinson, Burdette, Martin and Seright. "As long as they are profitable and as long as they have significant capital expenditures to justify the deduction." 

The mortgage interest deduction is dropping, so some homeowners won't be able to write off as much of those loan payments. 

"Not everyone has a million dollar home, so it covers most of Lubbock," said Jef Conn, president of the Lubbock Association of Realtors. "The new law provides for $750,000 of deduction. So if the loan on your house is up to $750,000 you can still deduct the interest in 2018."

The capital gains provision for property owners and the 1031 exchange, which allows investors to defer capital gains on property sales if they reinvest the proceeds into a similar property, did not change. That's a significant win for the real estate industry. 

"It's a major part of the real estate industry, a lot of commercial deals, billions of dollars a year is done in 1031 exchanges," said Conn. "It does affect the residential side as well, its just more prevalent on the commercial side so it's a big thing that it stayed around."

Overall the tax code didn't have any drastic change for real estate. Conn said it's still a great time to buy and sell property. 
 

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