Donald Trump has reclaimed the presidency while Republicans have secured control of both the Senate and House. With the 2024 election resulting in this power shift, the Biden-Harris budget proposal is expected to be sidelined. Thanks to multi-year efforts by the FEA, Section 1031 is safe for now!
Federation of Exchange Accommodators, Nov 12th. 2024.
Donald Trump was elected President, and the Republicans regained control of the Senate holding at least 53 seats. Republicans are on the brink of retaining control of the House with a 3-5 seat margin out of 435 seats. House Republicans currently hold 220 seats (with one Republican vacancy), so the 2025 result is not a massive increase in margin over 2024.
With a Republican sweep of the Presidency, House and Senate it is safe to say that the Biden/Harris budget proposal of a $500,000 cap or repeal of Section 1031 contained in the Democratic 2024 Platform is moot in the sense that the Democrats will not have a seat at the table when the tax bill gets written by Congress next year.
Today, because of the FEA’s multi-year efforts, we enjoy substantial House and Senate Republican support for the retention of Section 1031, as well as dedicated support among Ways and Means Democrats. Many Senate Finance Committee Democrats are supportive, but the overall number of Democratic members on the Senate Finance Committee has decreased, with four Democratic members exiting in 2024, and the election defeat of Senators Casey (PA), Tester (MT) and Brown (OH).
President-elect Trump ran on extending the Tax Cuts Jobs Act (TCJA) which expires at the end of 2025. During his campaign, Trump advocated tax relief for tip income, social security benefits and overtime pay. He suggested a targeted 15% corporate rate, and eliminating the $10,000 deduction cap on state and local taxes.
Republicans will need to identify revenue raisers to offset the $5 trillion dollar revenue loss from extending the TCJA, and financing the other campaign promises listed above. Republicans are likely to repeal, or reduce, Democratic initiatives such as green credits, the employee retention tax credit, and others. Targets might include eliminating the carried interest provision and enacting restrictive international tax provisions.
The Trump Administration will raise tariffs and attempt to use revenue from increased tariffs as an offset to pay for the continuation of the TCJA provisions. Many economists believe that increased tariffs on imports may be passed on to American consumers, which could result in higher prices and higher inflation. When inflation goes up, the Federal Reserve may respond by increasing interest rates again which will have a chilling effect on the commercial real estate market, further bolstering our arguments for the retention of IRC Section 1031.
The House and Senate Republicans will use the budget reconciliation process to accelerate tax and spending proposals. Once the House and Senate pass identical budget resolutions, they will proceed to mark up a budget reconciliation package which would be fast tracked through the legislative process.
We need to continue to be on high alert as the budget reconciliation process commences, and the debate on the 2025 tax bill unfolds in the coming weeks and months.
The insights provided by FEA highlight the importance of staying informed and prepared as policies evolve. If you have any questions or need further clarification on how these changes might affect your investments, don’t hesitate to contact us. Our team is here to help guide you through this complex landscape with expert advice tailored to your needs.
The Guys With All The Answers…
David and Thomas Moore, the co-founders of Equity Advantage & IRA Advantage
Whether working through a 1031 Exchange with Equity Advantage, acquiring real estate with an IRA through IRA Advantage or listing investment property through our Post 1031 property listing site, we are here to help Investors get where they want to be. Call them today! 503-635-1031.
