To get the latest information pertaining to commercial real estate investing, sign up to receive educational resources and potential opportunities delivered to your inbox. Questions? Call 212-593-1600

Question IDs
Object Type Map

Visibility Map
Active Map
Validator Map
Children Map

Parent Map

Question Options Map

Question Options

Question Option Activate Map

First Name
Last Name
Main Phone
Accredited Investor
Accredited Investor
Electronic Consent and Delivery

Real Estate Investors Hit A Home Run With The New 2018 Tax Act

Commercial real estate investors stand to be the biggest beneficiaries of the new Tax Law.

Commercial real estate investors have a lot to cheer about in the new tax law relating to changes in pass through entity deductions, depreciation schedules, and an increase in expensing capital expenditures. This article will describe how the new Tax Cuts and Jobs Act will impact the commercial real estate industry and why it will extend the ongoing strength in commercial real estate investing.

Pass-Through Entities & Deductions

Owners of pass through entities such as LLCs will be allowed to deduct 20% of "qualified business income" until 2025. While this deduction does not apply to most businesses, it does specifically apply to real estate income. The net effect on individuals will be a maximum tax rate on LLC income of 30% and much lower if it is long term gain. This is an important benefit to real estate investors as their after tax income will be higher than previous years. The intent of the 20% rule is to provide smaller businesses a corporate-like tax break by mitigating the tax disparity between the new corporate tax rate of 21% and the individual tax rate used by pass-through entities. By the way, this 20% deduction is limited to 20% of your taxable income excluding capital gains.

What does this mean for the commercial real estate industry?

Since most real estate investment entities operate as LLCs, the opportunity to take a 20% tax deduction is a gift to real estate investors. Although this new law limits the full 20-percent deduction to $315,000 for married couples and $157,500 for individuals, a key clause of the new law increases the deduction amounts by including a "capital element" in the equation. Tax experts agree the "capital element" clause expands these limits to provide a huge tax break for commercial real estate pass through entities because these entities are heavy in property and light in employees. This favorable tax benefit should encourage investors to compare investments on an after tax basis. On an after tax basis, real estate will offer much more attractive after tax returns than dividend stocks or bonds.

Capital Expenditures

Section 179 of the United States Internal Revenue Code provides taxpayers a choice to deduct the cost of certain types of property on their income taxes as an expense, rather than capitalizing and depreciating the cost of the property. One change in the new tax law doubles the amount that can be expensed from $500,000 to $1 million. Secondly, the 2018 tax bill expands the types of property defined in Section 179 to include “depreciable tangible personal property used to furnish lodging ”. This provision also expands types of value add property improvements such as roofs, HVAC, security and alarm systems. Specific real estate niches that will benefit include: hospitality, student housing and senior housing.

How does this impact the commercial real estate industry?

Under the new law, certain commercial real estate property capital expenditures can be 100% written off in the year incurred as opposed to being depreciated over time. This provision can effectively be used to offset an individual’s non-real estate related income from taxes up to a $1 million. In addition, the expansion of Section 179 will certainly make real estate funds consider value-add strategies to be more appealing because of the tax benefits. Since value add strategies have the potential to increase rents and profits from sales, those investing in commercial real estate will see an immediate benefit from this change.

Depreciation Schedules

The Tax Law limits the deductibility of interest on mortgages up to $750,000. However, the new law also allows real estate investors to opt out of that limitation on the deductibility on interest. If an investor takes full advantage of the interest expense deduction on a mortgage greater than $750,000, then they are required to utilize an alternative depreciation system with the recovery periods for nonresidential property at 40 years(up form 39 years), residential property at 30 years(up from 27.5 years) and qualified improvements at 20 years(up from 15 years). So the depreciable period has been increased a small amount.

Carried Interest

The carried interest extension of the holding period of partnership stakes by investment fund managers, from one to three years or more, will undoubtedly push some investment fund managers away from short term strategies such as fix and flip funds. Private equity real estate funds typically hold their assets longer than 3 years so there should be little or no impact on the investment. Additionally, when investors pull out of other funds they will very likely look at commercial real estate opportunities more favorably as the tax benefits serve their investment goals and timelines.

In Summary

Historically, a change in tax law is accompanied by at least two principles: it takes about a year to see the unpacking of any new changes, and there are always certain industries that benefit. Real estate investors will benefit multiple ways including: the pass-through tax deduction benefits and the increase in the amount of capital expenditures that can be expensed . Tax experts have made it crystal clear that commercial real estate and private equity real estate funds are the big winner of the newly passed 2018 "Tax Cuts and Jobs Act".

Invest With Confidence

We Do the Work to Provide You the Best investment Opportunities

  • A completely new alternative to investing in stocks and bonds.

    Every CityVest investment undergoes a thorough due diligence process by our experienced underwriting team. Of the hundreds of projects reviewed each month, fewer than 1% are approved.

    CityVest can help you:


      You benefit through professional investment structures, which target passive returns for our investors in a range from 10% to 25% - often with a preferred return.


      CityVest pre-screens investments for you through our underwriting and due diligence process. We partner with institutional investment funds and sponsors and we seek a preferred rate of return.


      Since real estate investments typically generate cash flow income, while common stock does not, real estate valuations tend to be less volatile and less sensitive to market risk factors.


      CityVest will handle all of the accounting and administration of your investment, while you can monitor the returns.

We simplify online real estate investing.

Get Started

Copyrights © 2022 All Rights Reserved by CityVest Capital Inc
Privacy / Terms of Service

Please read the important disclosures below. is a website owned by CityVest Marketplace LLC, a subsidiary of CityVest Capital Inc. (together with its affiliates, “CityVest”). By accessing this website, you agree to be bound by its Privacy Policy and Terms of Service.

The information on this website does not constitute an offer to sell, a solicitation of an offer to purchase or a recommendation of any interest in any investment or security described herein. Any such offer or solicitation shall be made only pursuant to the final confidential offering documents of any entity described on this website, which will contain information about each entity’s investment objectives and terms and conditions of an investment and may also describe certain risks and tax information related to an investment therein and which qualifies in its entirety the information set forth herein. The information contained herein does not constitute part of the offering documents of any entity. An investment in any investment included on this website, entails a high degree of risk (including the possible loss of a substantial part, or even the entire amount, of an investment) and no assurance can be given that any entity’s investment objectives will be achieved or that investors will receive a return of their capital. Past returns are not indicative of future performance.

Any financial projections or returns shown on the website are estimated predictions of performance only, are hypothetical, are not based on actual investment results and are not guarantees of future results. Estimated projections do not represent or guarantee the actual results of any transaction, and no representation is made that any transaction will, or is likely to, achieve results or profits similar to those shown. Any investment information contained herein has been secured from sources we believes are reliable, but we make no representations or warranties as to the completeness, adequacy or accuracy of any information provided. Investors should conduct their own due diligence, not rely on the financial assumptions or estimates displayed on this website, and are encouraged to consult with a financial advisor, attorney, accountant, and any other professional that can help you to understand and assess the risks associated with any investment opportunity.

Prospective investors should read the confidential offering materials of any privately offered investment product, including all risk and conflict disclosures included therein, before investing. Please read detailed information about such calculations in the investment manager’s detailed financial and information material. The information contained herein should be treated in a confidential manner and may not be reproduced or used in whole or in part for any other purpose.

CityVest does not make investment recommendations, and no communication through this website or in any other medium should be construed as such. Private placements on are intended for accredited investors (for persons residing in the U.S.), and for persons residing abroad in jurisdictions where securities registration exemptions apply. Private placements of securities are not publicly traded, are subject to holding period requirements, and are intended for investors who do not need a liquid investment. Private placement investments are NOT bank deposits (and thus NOT insured by the FDIC or by any other federal governmental agency), are NOT guaranteed by CityVest, and MAY lose value. Neither the Securities and Exchange Commission nor any federal or state securities commission or regulatory authority has recommended or approved any investment or the accuracy or completeness of any of the information or materials provided by or through the website. Investors must be able to afford the loss of their entire investment.

© 2022 CityVest Marketplace LLC. All rights reserved.