As the government in America plays a significant role in determining the property tax. Therefore, most of the real estate investors may want to know about the impact or change of government in America in the year of 2017, particularly when it comes to the property tax and other overall property dynamics. Similarly, some of the changes expected with the change of government may increase the problems for the investors. All the investors are required to be aware of the changes to not only take advantage of the benefits, but it would also help to prepare for the unwanted or detrimental changes in the tax policy. So, the following article will help you put things into perspective in easy steps.
Even though it is hard to come up with a clear picture on the property tax due to the vague nature of the property related legislation of the new government, however, if one surveys the statements of the representatives of the new government, the answers related to the changes of laws on property tax can be estimated to get a rough idea on what to expect in the year of 2017 in the real estate industry.
The Income Tax Range
According to the statements available in the public domain, the highest personal income tax may be decreased from 39.6% to 33%. It means that the investors who are involved in big property projects would probably get the most of the benefits. That being said, the investors who fall into the category of small income bracket, the 10% bracket may be substituted with the bracket of 12%. This means that the investors in the big income bracket and small income brackets could expect good changes in this domain.
If the standardized deduction is increased as compared to the reduction on the itemized deductions, it could profoundly alter the interest deductions on the primary home interest and the repercussions for the home owners. This means that the standard deduction in the year of 2016 $ 6,300 and the cumulative property tax of those investors who own a home would approximately be $10,000. To put simply, the expected deduction could increase to $15,000 for the itemized deductions and single filers. So, the deduction of $ 15,000 would be applied if one excludes the mortgage interest factor. Consequently, clients are expected to opt for renting a property more than utilizing the option of buying a property, as the benefits of investing in a property would be reduced. In short, the investors in the long term hold can take the benefits of the increased focus on the rental property as compared to the other parties involved in the real estate industry.
The focus of the clients is expected to shift towards the real link estate in the coming year because survey findings reveal that clients are fearful when it comes to losing money over the selling of the property. Additionally, the complications associated with the commission on selling the property could cost clients more than the anticipated range. As a result investors and clients in the property may incline towards availing the real link estate in the future.
The Capital Gains
The investors in the range of a high tax income are likely to take advantage of the tax rates while selling the property due to the continuation of the preferential capital gains, as the rates could be decreased more than the present range. In other words, the real estate agents can expect a boom in the market of real estate. However, if the preferential capital gains are not endorsed or applied by the experts on the property, the real estate agents can take advantage of the above-mentioned changes to increase the prospects of investment in the industry of real estate.
Tax on Investment Income
Although the presence of the tax on the net investment is not worrisome for the investors below the range of $260K, however the removal of this tax may benefit the investors who have higher income, as they had been paying more than 3% additional tax on note investments and rental estate. That said, it does not mean that he overall investors in the property business will not get the benefits, because many investors in the real estate had to pay various kinds of extra taxes. So, all those investors can engage in bigger property investment projects in the 2017 due to the expected relaxations on net investment.
Alternative Minimum Tax
This tax facilitates the addition of the real estate taxes, investment tax and various kinds of tax applied by the state to the investors. Therefore, the high income investors or those who has to pay the above-mentioned tax could save a lot of money and energy spent on the additional tax to expand the property business in the coming year.
As the heavy taxes on corporations have been a persistent feature in the past, the tax on the C corporations is expected to decrease in the next year. It means that the real estate investors can focus on making the C corporations tax decrease an integral element of the estate structure to make the most of the tax decrease on the C corporations. Furthermore, the property business with your name can be changed to the C Corporation to help you with the property tax.
Taxes on the Inheritance Property
If the present rate of the tax on the real estate is continued by the coming government in America, the tax applied on the inheritance property for your family could be lowered to large extent. Some experts believe that the inheritance tax could be lowered to the 40%. Similarly, the feature of the step-up tax can help the receiver of the inheritance asset or property to sell it as well without having to pay the cap gain taxes. However, if the step-up basis is not applied, the investors will have to work on the options to decrease the negative impact of the change.