While the Congress increases discussions on the extension of the tax on tax reductions and 2017 jobs (TCJA), which will probably also include some of President Trump’s campaign promises on taxes, the NAHB is committed to the legislators to ensure that the tax code continues to promote residential and economic growth.
For the sake of the cost of 4.6 billions of dollars associated with the extension of these tax reductions, the Congress envisages other modifications of attenuating tax. An emerging area of concern is a proposal for a ceiling or eliminating the capacity of a company to deduce state and local tax payments (salt) – including property tax payments – of its federal taxes.
Companies can currently deduct land taxes paid to governments of states or premises. This represents a basic tenant of our tax code that companies are imposed on profits, and not raw income.
The restriction or elimination of the capacity of real estate companies to deduce salt expenditure would result in an increase in operating costs, in particular for multifamilial properties: on average, almost 40% of operating expenses for a multifamilial unit are property tax payments. Nahb estimates conservative that rental properties pay nearly $ 170 billion per year in property taxes.
By registering a deep concern about how this salt proposal could have an impact on housing and the economy, 17 real estate groups, including NAHB, sent a letter to the congress last week warning that the continuation of this strategy would considerably affect the real estate industry, would reduce investments and the decline in the value of properties. The letter warned that an “increase in tax of this scale could put the current economic expansion in danger and considerably increase the risk of recession”.
The congress is at the first stages of the drafting of this tax bill. Nahb takes seriously the potential limits of business salt, but we also note that legislators have not yet made final decisions.
Congress has already imposed limits on individual salt deductions. In 2017, TCJA included a $ 10,000 ceiling on salt deductions for personal taxes. The legislators of high tax states have criticized this ceiling as harmful to their voters. During the elections, Trump undertook to increase the ceiling by $ 10,000 on individual salt deductions, which should be included in any tax bill. NAHB supports the increase in the salt ceiling to reflect inflation, the cost of living differences and to eliminate the sanction from marriage. (Under the current law, unique declarants and couples are both submitted to the same limit.)
In the absence of the congress, the majority of TCJA tax reductions should expire at the end of this year, which would represent a tax increase of $ 4. The NAHB supports the extension of TCJA and will be fully engaged in the tax debate.