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On ‎1‎/‎6‎/‎2018 at 4:52 PM, Max W said:

If you are thinking a SMLLC, that won't qualify for a pass through, as it reports its own income.  Maybe an S-corp would work.  Besides you'd save the $800 fee on the 1st year.

If a SMLLC is taxed as a disregarded entity on Sch C, then why wouldn't they qualify for the 20%?

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If the income passes through/lands on Form 1040, such as on a Schedule C, and the other requirements are met, then won't the 20% deduction apply?  Even if the business is a SMLLC?  Or even something more complicated of a H&W in a community property state?  Where did you find the distinction between a sole proprietor and a SMLLC for the deduction?

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On 1/3/2018 at 9:39 AM, Abby Normal said:

Yes, and I read on Forbes that Sch Es get it too, but I haven't been able to corroborate.

The bill and code don't clearly define trade or business.  As I understand it, in the final negotiations, congress extended deduction to include rentals to gain support of the bill by a couple of hold outs (who just happened to be owners of rental property).

Per section 199A (d) (1)  In general.
The term “qualified trade or business” means any trade or business other than—

     (A)  a specified service trade or business, or

     (B)  the trade or business of performing services as an employee

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14 hours ago, SaraEA said:

There is A LOT in this law that favors real estate owners.......

 

19 minutes ago, Abby Normal said:

Imagine that! <Steps slowly back from the edge of politics.>

I don't think it is politics to state the obvious facts.  The republicans needed to ensure that one of its senators voted for the bill, and they added language at the last minute to the bill, and after that language was inserted, the senator in question signaled his support.   That is just how the sausage is made in DC.   And it is apparent that the insertion at the last minute made the interpretation of the section hard, as the change to the bill is not harmonious with the rest of the sections.   If this was inserted earlier in the process, legislative staff probably would have had more time to integrate it more properly in the bill and signaled a more clear intent of the impact to Sch E rental properties.

No comments about whether this is good or bad, or who it favors...just a statement of the facts as we know them to have happened in the legislative process.

This is no different than the last minute changes to the refundable portion of the Child Tax Credit.   However, that change was just a number change, and not a change to the structure of the credit which was already written into the bill.   After that change, two other senators signaled their support.   And the sausage had a slightly higher content of one ingredient.

Tom
Modesto, CA

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38 minutes ago, BulldogTom said:

...This is no different than the last minute changes to the refundable portion of the Child Tax Credit. 

Refundable Child Tax Credit.  My first thought was, "Hmmmm.  They managed to cut taxes on people who don't pay [income] taxes." 

I ain't gonna tell y'all what I think about refundable credits.   I'm too busy working up in here.

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The refundable portion only increased by $300 over previous law. The real people getting screwed are those who were in the 28% bracket but are now in the 32% bracket, with high SALT and high investment fees or employee business expenses. I have a pilot whose taxable income is going to increase by around 30k, due to losing deductions and personal exemptions.

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17 minutes ago, Abby Normal said:

The refundable portion only increased by $300 over previous law. The real people getting screwed are those who were in the 28% bracket but are now in the 32% bracket, with high SALT and high investment fees or employee business expenses. I have a pilot whose taxable income is going to increase by around 30k, due to losing deductions and personal exemptions.

I personally think 20% is high enough.  For anybody.   Seriously, I do. 

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Let me just toss a wrench into the works.  With the state and local taxes capped at $10K, I do NOT see how this new law "favors real estate owners."  Unless you are specifically talking about owning rental properties, where the mortgage interest and real estate taxes go on Sch E, not Sch A, and where the taxes are not capped.  Around my area, real estate taxes alone (ignoring state income taxes) are *commonly* over $10K.  Not having those as a deduction certainly does NOT favor real estate ownership.  Ditto in NH; the town real estate taxes tend to be very high, to make up for the lack of income tax receipts since NH has no state income tax on individuals.

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3 hours ago, Abby Normal said:

The refundable portion only increased by $300 over previous law. The real people getting screwed are those who were in the 28% bracket but are now in the 32% bracket, with high SALT and high investment fees or employee business expenses. I have a pilot whose taxable income is going to increase by around 30k, due to losing deductions and personal exemptions.

I think it's $400. 

And your guy outta gripe at his state and locals about the high taxes.  And the broker for the high fees.  And the employer for making the poor guy pay out of pocket for work stuff.  Or is it mostly meals?  (I have never really understood why people eating out of town get a break when I don't.  I can't leave work and drive home to get food.  A girl's gotta eat, and they can pick dollar menu, too.) 

I do hate the exemption amount going to zero.  Really hate it.

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46 minutes ago, BulldogTom said:

I am glad I am not in Tennessee right now.   I declare a "hug free zone" on this board for the next 3 hours.

Tom
Modesto, CA

Hahahahaha my buddy Abby knows I'm playing.   I do love you all immensely.   ((((Real nice hugs only)))

 

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Catherine, real estate investors is the appropriate term.  Business interest deduction limited except for real estate businesses.  Like-kind exchanges limited to real estate.  There's more but I'm not in my office to look at the info. Sounds like RE investors got singled out for favors. Think about whom that is going to help.....

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14 hours ago, SaraEA said:

Think about whom that is going to help

I'm thinking it's going to help my elderly clients with two rental properties, the profit from which supplements their too-small social security and pensions in this high-tax state, where the taxes on those rental properties each approach $8K, and the mortgage interest another $5 or 6K.   I'm thinking it's going to help the woman who carved off a piece of her house to be a separate unit so she and her kids could afford to live there after her husband died.  And more.

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We know for sure that the REITs and Large Real Estate Investors are going to get the benefit because they are usually Trusts, Estates, Partnerships or S-Corps.   What we don't know is if a Schedule E meets the definition.   Very few practitioners are willing to make that call quite yet, but most seem to believe it will apply to Schedule E as well.  This is the most anticipated guidance from the IRS about the new tax law.

Tom
Modesto, CA

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