Given that President Donald Trump made his fortune in real estate, it shouldn’t come as a surprise that multiple provisions of the 2018 tax reforms stand to benefit commercial real estate directly, says Ian Prescott, a partner at the Salt Lake City-based CPA firm WSRP.
And though the final details have yet to be worked out, those looking to buy, sell, or rent commercial space will likely benefit from broader tax cuts and deductions, as well. Between the reforms and the current economic outlook, Blake Rigby, managing director at Colliers International, says the market seems to indicate that now is a good time to invest in real estate, regardless of whether buyers are considering short or long-term goals. While opportunity zones redistribute real estate investment, Mr. Rigby believes the across-the-board tax cuts provided by the 2018 reforms will leave the commercial real estate sector with more money available to explore new ventures.
While the write-off is subject to limits based on the value of any buildings on the property, Mr. Prescott estimates that being taxed on just 80 percent of their income will drop the effective tax rate to less than 30 percent for most within the commercial real estate industry. While that’s still higher than the 21 percent corporate tax rate, Mr. Prescott believes the new 20-percent pass through will prevent many real estate ventures from pursuing incorporation.
Because the pass-through applies to industries beyond real estate, Mr. Booth expects to see many smaller companies with more money in their pockets-giving them plenty of breathing room to potentially invest in real estate of their own. Barring an economic downturn-which Mr. Rigby points out is due in the next two-three years, based on the cyclical nature of the market-Mr. Rigby believes commercial real estate has nowhere to go but up.