APARTMENT ADVOCATE
NATIONAL APARTMENT ASSOCIATION
How Will President Biden ’ s Build Back Better Framework Offsets Impact the Multifamily Industry ?
What Offsets Remain On The Table , What ' s Out And How It Affects The Rental Housing Industry .
President Biden on October 28 went to Capitol Hill and released an updated framework for the Administration ’ s Build Back Better “ human infrastructure ” plan . After months of negotiations , this new plan has been scaled back by half from its original $ 3.5 trillion price tag .
Major provisions include expanded child tax credit , universal preschool , investments in elder care and expansions of Pell grants and free school meals . The proposal also includes $ 550 billion in clean energy and other climate change initiatives including a credit of up to $ 12,500 for U . S . -made , union-made electric vehicles , incentives for charging stations , the enhancement of existing home energy and efficiency tax credits and the implementation of a rebate program focused on electrification . The program includes funds to address lead in in drinking water , stormwater resiliency and supports resiliency efforts in Environmental Justice communities .
Of interest to our industry , the plan invests $ 150 billion in affordable housing provisions including investments in rental assistance , housing vouchers and the construction and rehabilitation of an estimated 1 million affordable homes . Click here to access a more detailed list of housing dollars .
The $ 1.75 trillion plan is offset by tax increases on ordinary income and capital gains income that would impact upper-income Americans . Left out of the package are any changes to like-kind exchanges , increases in the ordinary income tax rates , the general 20 percent capital gains tax rate , the tax treatment of carried interest and the 20 percent passthrough deduction or the taxation of unrealized capital gains at death .
A provision in the Ways and Means bill that would have restricted the ability to use IRAs to make certain types of real estate investments is also not included . Interestingly , the proposal does not include any changes to the current-law tax treatment of state and local income taxes . However , this is expected to be addressed as the package moves forward .
As of this writing , it is unclear whether the revised proposal will enable Democrats to cinch the congressional majorities they need to pass reconciliation legislation .
Following the White House ’ s updated framework , the House Rules Committee released an updated version of the package . Use the drop down features below to review the key tax provisions in play that would impact the multifamily industry .
Tax Increases in the Updated Framework
Individual Income Tax Rates
Although the Framework does not increase the top 37 percent tax bracket , it imposes :
• A 5 percent surtax on taxpayers earning over $ 10 million in modified adjusted gross income ( AGI ) ( i . e ., adjusted gross income less investment interest expense ) and an additional 3 percent surtax on taxpayers earning over $ 25 million in modified AGI .
Notably , there are no changes made to the 20 percent Section 199A pass-through deduction .
In sum , the top marginal income tax rate would rise to 39.04 percent from today ’ s 29.6 percent when the impact of the net investment income tax ( see below ) is included in calculations .
Capital Gains Income Tax Rates
Although the Framework does not increase the top 20 percent capital gain tax , it imposes :
• A 5 percent surtax on taxpayers earning over $ 10 million in modified adjusted gross income ( AGI ) ( i . e ., adjusted gross income less investment interest expense ) and an additional 3 percent surtax on taxpayers earning over $ 25 million in modified AGI .
In sum , the top capital gains tax rate would rise to 31.8 percent from today ’ s 20 percent when the impact of the net investment income tax ( see below ) is included in calculations . www . aamdhq . org NOV / DEC 2021 TRENDS | 57