The US national debt has ballooned nearly 200% since 2008, currently standing at $27 trillion. In April of this year, with the full weight of the pandemic, it reached a record 122% of GDP. Raising taxes and cutting spending are the two most popular solutions for reducing debt, and with Election Day just around the corner, it invites the question of what policies we’ll see put in place over the next four years.

Here are just a few items on our “watch list” that could impact the real estate industry:

1) Stepped-up Basis – this is the tax provision allowing beneficiaries of property to minimize capital gains taxes. The IRS basically resets the market value of these assets to their value on the date of the original owner's death. There has been a lot of talk about how eliminating step-up in basis would boost tax revenues but increase the burden for top-bracket income earners. So far, the administrative and logistical nightmare that the IRS would have to juggle in terms of auditing, record-keeping, and tracking estate assets has been a deterrent to its reversal.

2) Long-Term Capital Gains – in the instance of a Democratic win, we’ll likely see an increase in long-term capital gains taxes for those earning more than $1MM/year. Today, sales profits from assets owned for more than a year are taxed at either 15% or 20%, depending on your annual income. Biden has proposed raising the tax to 39.6% for the highest earners.

3) First-time Home Buyer Credit & Affordable Housing Development – Biden has proposed a $15,000 tax credit for first-time home buyers as well as a $100 billion "Affordable Housing Fund" to expand low-income housing.

Whatever the outcome of the Presidential election, the party controlling Senate will also greatly influence future policy and impact short-term growth forecasts. Overall, markets seem to view “split government” - with one party checking the other - favorably.