On Dec. 13 Republican leaders in the Senate and House of Representatives reached an agreement on a unified tax reform bill after months of back-and-forth and revisions.
On Dec. 20 both houses of Congress successfully passed the GOP-led tax reform package, the largest set of changes to the tax code in a generation. The changes stand to have huge impacts on the real estate industry and all of American life.
Tax reform changes include:
- Mortgage interest deduction caps for primary and secondary residences at $750,000 (down from $1 million today), while capping state and local tax deductions (SALT) at $10,000 (there’s no cap at present), according to language in the new law.
- Pass-throughs, often used by brokerages and other real estate entities, will be locked into a 20 percent deduction — a substantial savings given that pass-through owners currently pay taxes on these profits through the individual income tax rate.
- Corporate tax rate lowered to 21 percent, from a current rate of 35 percent, effective next year.
- Top individual earners will inherit a tax rate of 37 percent, down from the present value of 39.6 percent.
Many of the compromises to the original GOP bill stemmed from an ambitious lobbying campaign spearheaded by the National Association of Realtors that inundated elected officials with more than 300,000 emails leading up to the vote.
President Trump signed the bill into law on Dec. 22.