Real Estate Implications of Federal Budget

Congress has passed and the President has signed into law, to fund the Federal Government for Fiscal Year 2016. The new legislation, known as the omnibus appropriations bill, will put an end to the series of stop-gap funding measures known as “Continuing Resolutions” that have funded the government since October 1, 2015. This new bill will expire in September 2016. The real estate related provisions are listed below:

Mortgage Debt Forgiveness – Authority extended for two years (2015 & 2016)

Mortgage Insurance Premium Deductibility – Provisions allowing the deductibility of mortgage insurance premiums were extended for two years (2015 & 2016)

Immediate Expensing of Business Equipment and Certain Real Estate – The expensing provision for equipment and certain real estate used by small- and mid-sized businesses is made permanent (section 179). The real estate includes leasehold improvements, certain restaurant improvements, and certain retail improvements. Moreover, the $250K cap on this qualified real estate (which is half that of personal property) is being removed starting in 2016, so all business assets (real and personal) will have the same $500K limit each year, and indexed for future inflation.

Bonus Depreciation – Extends bonus depreciation treatment for five years. Moreover, the provision now includes a new category called “Qualified Improvement Property,” which is defined as an improvement to the interior portion of an existing non-residential commercial building (except for elevators, escalators, or enlargements). Thus, most leasehold improvements will now generally be eligible for immediate expensing for the smaller and mid-size businesses and for bonus depreciation (50% expensing) for the bigger companies.

Read about all the real estate related provisions in the omnibus bill here: 2016 Federal Budget

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