Policy Issues



Tax Reform: Tax Cuts and Jobs Act of 2017

In areas critical to real estate investment, the historic tax reforms enacted in 2017 included a number of provisions that ensure the tax code continues to tax real estate on a rational and economic basis.

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Throughout the debate leading to the passage of the Tax Cuts and Jobs Act of 2017, The Roundtable played a leading role in encouraging policymakers to retain or enhance key elements of the tax code that promote productive real estate investment and job growth. The Roundtable worked hard to ensure that policymakers had the appropriate data, facts, and analysis to understand how potential tax reform could affect real estate values and local communities, along with the broader economy.


The Tax Cuts and Jobs Act (TCJA) enacted in December 2017 represented the most sweeping changes to the tax system since 1986.  The landmark tax bill was supported by The Real Estate Roundtable.  It reduced barriers to private sector capital formation and preserved the rational tax treatment of real estate.  Among other changes, the bill lowered the corporate tax rate from 35 to 21 percent, lowered individual rates, and created a new deduction for pass-through business income that can effectively reduce the tax rate on pass-through businesses to 29.6 percent.  The bill provided generous new rules for the immediate expensing of certain capital investment while limiting the deductibility of business interest expense (with an exception for real estate debt).

In areas critical to real estate investment, the law included a number of provisions that ensure the tax code continues to tax real estate on a rational basis.  Specifically, the legislation:

  • Preserved the deductibility of business interest. The new law restricts the deductibility of net business interest expense to the extent it exceeds 30 percent of earnings before interest, tax, depreciation, and amortization (EBITDA).  However, an electing real property trade or business can continue to fully deduct net interest.
  • Retained the deferral of capital gains tax for real estate like-kind exchanges.
  • Generally maintained real estate cost recovery rules.  The new law maintains extended cost recovery for real property, while applying slightly longer recovery periods for taxpayers electing to use the real estate exception to the business interest limit.
  • Preserved pass-through taxation of partnerships and provided 25% tax cut to pass-through businesses.  Some policymakers had suggested taxing all businesses at the entity level, like a C corporation.  However, the final bill not only maintained the flexibility associated with pass-through tax rules, but also included a 25% tax cut for noncorporate businesses to ensure parity with the tax relief for corporations.
  • Increased the holding period for the preferential capital gains rate on “carried interest.”  The bill requires taxpayers to hold certain partnership interests or assets for 3 years, rather than 1 year, to qualify for the reduced capital gains rate.


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