Donald Trump's tax cut is gaining traction in the US commercial real estate industry (CRE) after facing a debt crisis due to record-high vacancy rates.
Currently, more than vacancy, the CRE industry also has increased financing costs to shoulder, and industry trade groups warn that higher taxes could worsen the situation.
According to Reuters, industry leaders are seeking ways to preserve important tax breaks, such as pass-through deductions and low capital gains taxes, especially since former President Trump's tax reliefs are about to expire soon.
So far, the real estate sector of the country heavily favors Trump with donations totaling $234.9 million, unlike Harris' $117 million, especially since the Republican nominee has been vocal about tax relief and incentives this 2024 US presidential election. The National Association of Realtors has also contributed more to Republicans with $5.2 million.
Tax Concerns of the US Commercial Real Estate Industry
In 2025, the US CRE industry will confront a $1 trillion debt. All due to delinquencies on commercial mortgage-backed securities projected to rise to 11% and record-high office vacancies in urban areas due to remote work trends.
To fix this, CoStar reported that the industry is particularly focused on reauthorizing key provisions from Trump's 2017 tax cuts, which allow pass-through business owners to deduct up to 20% of their business income from taxable income. Trump has expressed intentions to make his tax cuts permanent, but he has specifically not clarified his stand on the specific provision stated.
Kamala Harris, on the other hand, has indicated plans to roll back the 2017 tax cuts, but with concerning changes to tax breaks. This has been letting investors avoid paying capital gains taxes if they reinvest in new properties. Favor over Trump is also pushed by Harris supporting limiting this for high earners by proposing a 28% corporate tax rate, VCPost. With many office buildings empty, Harris suggests converting them to housing, but experts say only about 10% of these spaces could be repurposed.
Regardless of who will win this November, the industry will still have to face the expiration of tax cuts at the end of 2025.
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