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NY’s Real Estate Industry Vows to Revolt Against New Taxes, Regulation

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By: Benyamin Davidsons

The NY real estate industry has been ailing from vacancies, and a decline in investments as effects of the pandemic. But it has also been ailing from the new regulations and taxes seemingly targeting the industry. Now industry leaders and organizations are promising to fight back against the government-led problems facing them.

As reported by the NY Post, in addition to the extended eviction moratoriums, environmental regulation, and the hefty SALT [ state and local tax] cap, the Biden administration now intends to add more taxes on real estate profits. Industry execs say the White House plans to increase the tax on long term capital gains above $1 million from 20%, to a top bracket rate as high as 43.4%. Last month, the Biden administration also announced that the capital gains tax hike would be retroactively applied to assets sold after April 2021. “It’s a perfect storm with the worst potential outcome,” said Robert Gilman, a partner with the accounting firm Anchin, Block & Anchin LLP.

Gilman also bashed the possibility of ending 1031 exchanges — which is when sale proceeds are reinvested as a way to avoid paying capital gains taxes. “Investors are going to be holding onto buildings,” Gilman explained. “Usually when someone buys a new building, they spend money on the trades and so that will also hamper the construction industry.”

With New York City and state taxes added together, investors making just over $1.1 million will now be responsible to pay a whopping 56.9% in taxes. New York State is also raising its top bracket for people making from $1,077,550 to $5 million from 8.82% to 9.65%, while people making over $25 million will be paying 10.9% to the state alone.

“There are people I know who are leaving New York and don’t want to pay the income tax rate — and the SALT [ state and local tax] cap is brutal,” said attorney Jay Neveloff, a partner with Kramer Levin, referring to the $10,000 cap on deductions of state and local taxes on federal income tax returns. “New York will lose revenue because their tax rates are also going up so will they [really] have a net gain by having higher taxes?”

The industry also resents the extended eviction moratoriums, which they say allows tenants who did not suffer from pandemic to get away with nonpayment of rent. “The law could have been written differently to ensure it was properly targeted,” said James Whelan, president of the Real Estate Board of New York.

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