How the New Tax Act Affects Real Estate

Document Type



Published by The American Law Institute in The Practical Real Estate Lawyer, volume 10 issue 1, 1994.

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American Law Institute

Publication Source

The Practical Real Estate Lawyer


The Omnibus Budget Reconciliation Act of 1993 (OBRA 1993) contains significant changes in the taxation of real estate, some of which are retroactive to 1992. In particular, OBRA 1993 affects: 1. low-income housing credits, 2. mortgage revenue bonds, 3. alternative minimum tax, 4. real estate business debt and passive activity losses, 5. depreciation, and 6. real estate investments bytax-exempt organizations. OBRA 1993 includes a number of provisions designed to make it easier for taxpayers to invest in real estate. Although the Act increases the maximum individual income tax rates to 36% and 39.6%, it left intact the 28% maximum on long-term capital gain. High-income taxpayers should plan to take advantage of this significant tax differential. Builders and low-income taxpayers may again take advantage of low-income housing credits and mortgage revenue bonds, on a retroactive basis.