Getting Back to Business: CARES Act Tax Provisions for the Real Estate Industry

The real estate industry has been hit hard by the COVID-19 Pandemic. One of the major issues faced by landlords is the uncertainty of rent collection due by tenants. This could be caused by businesses being shut down due to the stay at home orders, tenants’ inability to pay rent due to job status, and other related issues. Many real estate landlords have and continue to reach out to lenders to negotiate some sort of mortgage relief.

The Gettry Marcus Real Estate Group wants to reiterate that there are several tax provisions in the CARES Act that could result in significant tax savings to real estate owners and provide some relief during these trying times:

  • Technical correction in qualified improvement property by correcting depreciable life from 39-year property to 15-year property and making this property eligible for 100% bonus depreciation effective for property placed in service after December 31, 2017.
  • Postponement of limitation on excess business losses for non-corporate taxpayers so real estate professionals are not prevented from using business losses to offset other income for tax years arising in 2018, 2019, and 2020.
  • Modification to net operating loss rules eliminating the 80% of taxable income limitation and allowing a 5-year carryback for net operating losses arising in tax years beginning in 2018 and before January 1, 2021.
  • Limitation on deductibility of business interest expense under code section 163(j) has been increased from 30% to 50% for tax years beginning in 2019 and 2020. For partnerships, the 30% limit is still in effect for 2019 but 50% of the excess interest will be deductible by the partners without limitation in 2020.

Please note New York State has decoupled from these federal tax provisions.

Gettry Marcus is actively looking for ways to assist our real estate clients during these difficult times. If you would like additional information please contact your Gettry Marcus Advisor or the author of this article, Steven Oppenheim.