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Congress tweaked a provision in the 2017 tax law as part of the latest COVID-19 relief package last month that will give some apartment owners tax relief.
Multifamily rental properties — especially older communities catering to lower- and middle-income residents — have been strained as a result of pandemic-induced layoffs or wage cuts.
Under the new law, apartment landlords who either purchased or developed their properties prior to Jan. 1. 2018 will no longer be subject to depreciation of 40 years, as was contained in the 2017 law, which resulted in higher taxes.
Instead, landlords will be able to depreciate properties for a period of 30 years. By comparison, the standard depreciation period for commercial real estate is 27.5 years. Depreciation allows landlords to deduce a fraction of the value of their property off their taxes annually.
Matthew Berger, of the National Multifamily Housing Council, told political publication Roll Call that the new provision alters the tax code that “unnecessarily disrupted cash flows and increased the tax liability” of owners of older apartments.
The measure was supported by the National Association of Realtors, the Real Estate Roundtable and the National Association of Home Builders.
The change is expected to save taxpayers, and cost the federal government, $3.3 billion over the next decade. Apartment landlords may also be able to apply for tax credits or refunds to their 2018 and 2019 tax returns.
The change comes as many landlords are struggling with rent collections because their tenants have lost jobs or had wages disrupted because of the pandemic. At the same time, landlords in Florida — until recently — and elsewhere faced eviction moratoriums.
That seems to have been reversed by the incoming Biden Administration, however, on its first day in office, at least temporarily. Stay tuned.
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