Thanks to an 11th-hour tax compromise, Congress avoided across-the-board, automatic tax increases that would have hit taxpayers at all levels. Yet the solution to the fiscal cliff is not complete. Therefore we’ll call the unresolved issues a “fiscal slope.”
Here’s how the current budget deal could affect Boston commercial real estate and why we’re not taking our eyes off of Congress just yet.
First, the good news: capital gains tax increases are modest, all considered. Single tax filers with incomes of $400,000 and up will face capital gains tax rates of 20% instead of 15%. For married taxpayers filing jointly, the income threshold is $450,000.
More good news: the Alternative Minimum Tax is no more.
Even more good news: income tax rates have been left alone for the most part. Single filers at the $400,000 income threshold and up will have a tax rate of 39.6%, up from 35%. Why call a tax increase good news? Because this is income threshold well above the original announced tax-hike target of $250,000. The higher threshold will not snag as many small business owners.
For all the gritty details, you’ll want to see your tax preparer or visit IRS.gov. Taken as a whole, the tax increases are far less than what was expected, and should give some confidence to small business owners and start-ups. In turn, this should benefit demand for commercial space in the Boston area.
However, the budget fight isn’t over yet, and we have a “fiscal slope” until the media coins a better term. This is because our lawmakers put off decisions about Federal budget cuts, and they have given themselves a two-month deadline. We also have to accept that the approved tax increases won’t make a big dent in the deficit. This means that cuts in some areas of government are inevitable, and that more tax increases remain possible.
Therefore, some Boston area businesses will be waiting for the other shoe to drop, especially those related to Defense contracting, consulting, and so on. The State of Massachusetts has a few billion dollars connected to Defense industries in some form or another, giving us a vested interest in the next series of budget discussions.
In the meantime, the current economic indicators show good potential for Metro Boston commercial real estate! In fact, if you are thinking to expand business operations, now is the perfect time to shop for commercial space in the Boston area. There is a variety of office and retail space available in prime locations, and I would be happy to tell you more about it!
Contact me today for help with your commercial real estate needs. I will prepare a cost analysis for the square footage, location and building type you are looking for, and find the ideal location!