Many commercial real estate investors are wondering what benefits we will see with the new tax reform. Here is a great article on what the changes may mean for real estate Investors. Call me today if you would like to discuss it further:
Remember towards the end of 2017 when everyone was talking about tax reform? While many thought it was a done deal, those of us in the tax profession knew that the tax changes were far from being finalized. Without too much media buzz, the IRS has recently issued some temporary guidance on what tax reform may mean for taxpayers.
As the article points out, the regulations are not fully finalized, so the IRS has issued “temporary” guidance on how the law may impact taxpayers. One of the big tax breaks to come through under tax reform was the Section 199A deduction. This provides certain flow-through business income with a 20 percent deduction; in other words, it frees 20 percent of the profit from taxes.
This benefit applies whether you are an LLC, an S-corp, a partnership, or a sole proprietorship. What is at issue is the type of income, because only certain types of income receive this 20 percent deduction. The temporary regulations didn’t provide much clarity about whether rental income would qualify for this deduction. Here’s what the article says:
Instead of clearly stating all rental income would qualify for this tax break, the IRS instead made references to other code sections that create further mystery on exactly when rental income may qualify for this tax break. Currently, there are many debates in the tax world on what type of rental income may qualify for this tax break… My personal opinion on this topic is that all rental income may be eligible for the 20% tax-free treatment. There are many court cases in the past where the tax court affirms the definition of rental income to be “trade or business” income.
Talk with your tax advisor and your broker. The professionals at Pacwest Commercial Real Estate are commercial real estate Eugene experts. Call us today if you would like to discuss this further at 541-912-6583.