How the 2024 Candidates’ Tax Plans Impact Real Estate Investors

As the 2024 presidential election looms, real estate investors are paying close attention to the tax proposals of two key figures: Donald Trump and Kamala Harris.

Both have outlined starkly different plans that could shape the future of the real estate market, particularly for landlords and property owners.

Regardless of where you are in your investing journey, it’s important to understand how these tax strategies could impact your real estate investments’ bottom line.

In this article, we’ll break down each candidate’s proposals, examine how they stack up against one another, and provide insight into what real estate investors might expect in 2024.

Trump’s Tax Proposals for Real Estate Investors

1. Extension of the Tax Cuts and Jobs Act (TCJA)

Ah, the TCJA—Trump’s baby from 2017—is set to expire in 2025, but don’t worry, if Trump’s re-elected, he’s already promised to keep it alive.

For real estate investors, this is like keeping a golden goose.

The TCJA brought a few significant perks to the table:

• 100% Bonus Depreciation: This allows you to front-load depreciation, which means you can write off a big chunk of property improvements and purchases right away. Less taxable income = more money in your pocket. This is an incredibly potent tax reduction tool for high-income W-2 and business owners who use the real estate professional status (REPS) or Short-Term Rental (STR) Loophole.
• Qualified Business Income (QBI) Deduction: If you’re operating a pass-through business (like many landlords), you get a nice 20% deduction on qualified income. That’s a pretty sweet deal for anyone managing multiple properties or working in active real estate businesses such as flipping, wholesaling, construction, or as a real estate agent/broker.
• Opportunity Zones: These tax incentives are like a cherry on top. If you’re investing in designated distressed areas, you could defer or even completely eliminate capital gains taxes. Sounds too good to be true, right? Nope, it’s real, and Trump wants to keep it going.

2. Reduction of Corporate Tax Rate

Trump’s already reduced the corporate tax rate from 35% to 21%, but hold onto your hats—he’s pushing to bring it down even further, to 15%. If you operate a business structured as a C-Corp, this could mean a bigger slice of the pie for you.

3. Elimination of Taxes on Tips and Overtime

While this is aimed at service workers, there’s a potential ripple effect here. If your tenants are making more money (or keeping more of what they make), they might have an easier time paying rent consistently. This is good news for landlords, though the overall impact on the market remains up in the air.

4. Tariff System Overhaul

This one’s a bit more out there. Trump’s floated the idea of scrapping federal income taxes and replacing them with tariffs. While that might sound like a wild ride, there’s a real possibility it could increase the cost of goods—think construction materials and renovation supplies—which could pinch your profits. And if tenants have less disposable income due to inflationary pressures, well, you get the picture.

5. Social Security Tax Elimination for Seniors

Retired real estate investors, rejoice! Trump’s proposing to eliminate taxes on Social Security income. If you’re relying on Social Security to fund your golden years while managing properties, this could be a nice little bump. Plus, it could help Seniors access a wider array of housing options with their additional tax savings. However, the long-term effects on the economy, especially if deficits grow, could introduce some instability in the housing market.

Kamala Harris’s Tax Proposals for Real Estate Investors

1. Expiration of TCJA Provisions

Kamala Harris takes a different approach. She’s not as keen on extending Trump’s TCJA. Here’s what could change under her plan:

• Bonus Depreciation: Currently at 60%, bonus depreciation will drop to 40% in 2025 and disappear entirely by 2027 if left untouched. That means you’d lose the ability to accelerate depreciation, which could hike up your taxable income.
• QBI Deduction: Harris also supports letting the QBI deduction phase out, which would take away the 20% tax break that many pass-through businesses (including landlords) have been enjoying.

2. Tax Increases on High Earners

If you’re in the big leagues of real estate investment, Harris’s proposed tax hikes might make you cringe. She’s talking about:

• Corporate Tax Rate Bump: Harris wants to push the corporate tax rate back up to 28%, which could eat into the profits of your C-Corp, if you have one.
• Top Individual Tax Rate Hike: If you’re in the top 1% of earners, your tax rate could jump from 37% to 39.6%. Ouch. This means less money left over to make real estate investments.

3. Rent Control and Housing Reforms

If you’re a landlord with a sizable portfolio, especially in multifamily properties, Harris’s support for rent control could affect your profit margins.

She’s mentioned:

• Rent Caps: Large landlords (those with more than 50 units) could face limits on how much they can raise rents, which could slow down your cash flow growth.
• Preventing Rent Algorithms: Harris has also spoken about stopping landlords from using algorithms to set rent prices. If you rely on these tools to optimize your rents, you might have to go old school with pricing.

4. Incentives for Affordable Housing

Harris’s platform prioritizes affordable housing, which could open up opportunities for investors focused on this space:

• Tax Incentives for Building Starter Homes: If you’re interested in development, there could be new tax breaks for building affordable homes, but that also means more competition.
• $25,000 First-Time Homebuyer Credit: This might boost demand for single-family homes, driving up property values, which is good for sellers—but also reducing the number of people looking to rent.
• The Stop Predatory Investing Act: This would limit tax benefits for large-scale investors investing in single-family homes, which might slow down institutional investors but wouldn’t affect most smaller landlords.

Who Benefits More? A Comparative Look for Real Estate Investors

Let’s break it down:

Depreciation Benefits:

• Trump: Extending bonus depreciation = lower taxable income for investors.
• Harris: Phasing it out = higher taxes, especially for landlords who love using non-passive losses to reduce taxes on W-2 and active business income.

Corporate & Individual Tax Rates:

• Trump: Pushing corporate taxes down to 15% benefits owners of C-Corps, while keeping individual taxes lower means more take-home profits.
• Harris: Hiking corporate taxes to 28% and increasing rates for high earners would sting for large firms and wealthy investors.

Rent Control & Regulation:

• Trump: No new restrictions = landlords can continue setting rent based on market demand.
• Harris: Rent control and regulation could limit income for big landlords, especially those in high-demand areas.

Affordable Housing:

• Trump: Focused on traditional investments with fewer regulations. However, Opportunity Zones may still help provide housing in low-income communities.
• Harris: A bigger push for affordable housing could lead to tax incentives for those willing to invest in this space but also more competition.

Final Thoughts: Which Plan Works for You?

If you’re a real estate investor with a focus on building large portfolios, high-end properties, or cash-flowing rental units, Trump’s tax proposals might be appealing. His focus on extending the TCJA, reducing corporate taxes, and avoiding regulatory interference aligns with investors who want to keep more money in their pockets.

On the flip side, if you’re interested in affordable housing or more progressive tax policies, Harris’s proposals might open up some new opportunities. However, you’ll need to be ready to navigate rent control measures and higher taxes on profits.

In the end, both candidates offer clear paths that could significantly shape the future of real estate investments. Staying informed and adapting to potential changes is key to ensuring your investment strategy continues to thrive in 2024 and beyond.

Stay updated on Harris’s and Trump’s tax proposals with our candidate tracker which we update on an ongoing basis.