A question from Andrew:
Hey guys, can someone put some clarity around this announcement? I don’t see any additional tax break from what is the case now with new builds. If anything is a little worse as they imply, you need to build 20 or more in one development to qualify.
The latest announcement that would see institutional build-to-rent developers being able to deduct interest expense in perpetuity does not affect the existing entitlement for new-build owners to enjoy interest deductions for 20 years from code compliance. Once the legislation for the former is passed (we expect this to be late August/early September), the two exemptions will operate concurrently under the interest limitation rule. To put it plainly, the ability of BTR developers to deduct interest in perpetuity does not affect private investors/developers’ ability to deduct interest for the first 20 years of the life of the property.
At the time of this post, the bill that would empower the IRD to exempt BTR developers from interest limitation is yet to be introduced in Parliament. For the time being, we recommend all investors rely on this Beehive announcement (instead of articles from news media) as the most accurate source of information.