How Tax Strategy Is Quietly Shaping Real Estate Decisions in the Tri-State Market

Written by:

Steve Marcinuk

Date:

24 Apr 2026

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As real estate investors across the country navigate a market defined by rate pressure, financing constraints, and uneven asset performance, the tax dimension of decision-making is playing a larger role than most headlines suggest. For practitioners working closely with property owners, the picture on the ground is more nuanced than broad market narratives tend to capture.

Stephanie Dominguez, a tax partner at WilkinGuttenplan who has spent two decades advising real estate clients across the tri-state area, offers a ground-level perspective on how investors actually behave – and why tax considerations often drive decisions that market data alone cannot explain.

A Practice Built Around Real Estate Complexity

WilkinGuttenplan, a firm with roots going back to 1983, has built a substantial real estate practice alongside its work in international tax, financial services, and condominium and homeowner association accounting. Dominguez’s core focus is partnership tax – the ownership structure that underpins the majority of rental real estate in the United States. Day-to-day, that means advising clients on deal structure, investor arrangements, waterfall provisions, and tax-efficient execution of transactions.

The firm’s client base spans residential multifamily, industrial, and retail assets, with most holdings concentrated in New Jersey, New York, and Pennsylvania. However, some clients own property across as many as 30 states.

Transaction Activity Is Picking Up – With Caveats

After a relatively quiet stretch, Dominguez is seeing increased movement among her clients. “Sales are definitely ticking up more than in the last couple of years,” she notes. But that activity is not uniform across asset types.

The office sector remains a clear outlier. Remote and hybrid work patterns that took hold during the pandemic have not fully reversed in the region, and lenders are responding accordingly. Banks are pushing back on office loans, demanding evidence of new leases and detailed plans for addressing vacancies before approving financing. “It’s just becoming a lot more difficult and slower to get that financing process done,” Dominguez says.

Industrial and warehouse assets, by contrast, continue to attract capital and lender confidence – a divergence that is reshaping where investors choose to deploy.

Tax Aversion as a Market Force

One of the more underappreciated drivers of real estate investor behavior is a straightforward preference for tax deferral. Like-kind exchanges under Section 1031 of the tax code remain the dominant tool, allowing investors to sell a property and reinvest the proceeds without triggering an immediate tax event. “The tax rate pressure is probably the factor for why they’re looking to do those 1031s,” Dominguez says.

The mechanics, however, are not always straightforward. Dominguez points to a recent engagement in which a client ultimately decided against pursuing it. With outside investors involved and no clear majority control, coordinating a like-kind exchange became impractical.

Alongside traditional 1031 activity, installment sales – where proceeds are received over time rather than in a lump sum – are gaining traction as an alternative disposition strategy. Dominguez notes an increase in these arrangements, a signal that investors are finding ways to manage tax exposure when a straight exchange isn’t feasible.

Opportunity Zones

The Qualified Opportunity Zone program, introduced under the 2017 Tax Cuts and Jobs Act, had begun to fade from conversation as its original deadlines approached. A recent legislative extension has renewed interest. “That’s something that has sort of tapered off over the last couple of years, and now we’re expecting to see that tick up again,” Dominguez says.

Her perspective on how clients should approach the program reflects a broader principle in tax planning: the investment must stand on its own merits before tax benefits enter the equation. “The tax can’t drive the investment decision,” she says. “It has to be a good investment first.”

For investors who committed capital in 2018 and 2020, outcomes have generally met or modestly exceeded expectations – though results vary considerably by specific investment.

Regulatory Shifts Worth Watching

Recent changes to interest expense deductibility rules have provided some relief to leveraged real estate investors. The IRS had imposed limits on the amount of interest expense that could be deducted – a constraint with meaningful implications for highly leveraged deals. A relaxation of that rule for the tax year 2025 has eased some of the pressure. “That’s helped alleviate the rate pressure we’re seeing on the financing side,” Dominguez says.

On the individual tax side, the state and local tax (SALT) deduction cap – set at $10,000 since 2017 – remains a persistent concern for high-income clients in New Jersey and New York. A recent adjustment raised the threshold to $40,000, but additional restrictions mean many high earners still face the original limitation in practice. “It’s always a hot topic for our clients,” she says.

For now, Dominguez does not anticipate major new tax legislation, noting that a new tax bill passed last year has quieted the legislative landscape.

Local Incentives Creating Targeted Opportunity

Within the tri-state region, certain municipalities offer payment-in-lieu-of-taxes agreements, commonly known as PILOT programs, that can meaningfully reduce the real estate tax burden on qualifying residential projects. These arrangements involve cost audits and income restrictions that require careful navigation. WilkinGuttenplan has developed a dedicated practice around them.

For developers working in eligible markets, PILOT programs represent a concrete lever for improving project economics – one that does not always receive the attention it deserves relative to its financial impact.

Hospitality Investors Quietly Rotating Out

A separate pattern worth noting is movement among hospitality-focused clients, who appear to be gradually rotating out of hotel and lodging assets in favor of more straightforward real estate investments. Dominguez observes that these portfolios are shrinking, citing profitability and operational intensity as key factors. Hospitality assets require more active management and incur higher labor costs, making them less attractive compared with other real estate sectors that perform well with less hands-on involvement.

Looking Ahead

For the investors and professionals, Dominguez advises, the broader takeaway is fairly direct: in a market where financing is selective, asset performance is uneven, and tax law continues to evolve, the gap between a well-structured deal and a poorly structured one is widening. Investors who treat tax planning as integral to deal execution – rather than an afterthought at year-end – are finding more paths to deploy capital efficiently, whether through 1031 exchanges, installment sales, opportunity zones, or local incentive programs.

The firms serving them are positioning themselves accordingly. WilkinGuttenplan has been deepening its engagement with industry groups, including the New Jersey Builders Association and the New Jersey Apartment Association, to expand its presence among developers and investors in the region as it heads into 2026.

About the Expert: Stephanie Dominguez is a tax partner at WilkinGuttenplan with two decades of experience advising real estate investors across the tri-state region, specializing in partnership taxation, deal structuring, and real estate transaction planning. Her perspective highlights how tax strategy —through tools like 1031 exchanges, opportunity zones, and local incentive programs — has become a central driver of investment decisions in today’s higher-rate, financing-constrained real estate environment.

This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.