Questions remain for real estate in debt ceiling deal

The debt ceiling agreement signed into law this week has no direct impact on real estate tax rules or spending provisions, but the industry isn’t out of the woods yet, because the deal includes authority that could make it easier for Congress to make tax law changes in the months ahead.

The next 100 days could be the most important part of the battle for real estate, because it’s in this period that the mortgage interest deduction and tax rules for carried interest are expected to be most at risk.

Under the carried interest provision, the income of general partners in real estate partnerships is taxed at the capital gains rate. Under changes that have been proposed in the past, that income would be taxed as ordinary income, a higher rate.

The new law increases the debt ceiling in two steps. The first is automatic through the end of the year. The second increase is contingent on a number of factors, including recommendations for cuts and tax increases from House and Senate committees and a new super committee that will package together the recommendations or make its own as needed.