SaraEA Posted January 19, 2018 Report Share Posted January 19, 2018 More on how the new law helps large RE investors. Architects are excluded from the selected service businesses subject to the limitations on the 20% exclusion. (They were always grouped with drs, attorneys, accountants, etc before.) The W-2 limitation piece of the exclusion doesn't affect big real estate holdings because most employ management companies and have few W-2 wages. I believe some rental property will now qualify for Sect 179. The mom and pops may reap some benefit if rentals are ultimately determined to be a trade or business eligible for the 20% exclusion. I tried to calculate the exclusion for a client who makes enough to be subject to the phase-out. WHAT A CONVOLUTED MAZE! Being over the $315k means calculating the phase-out, then applying the W-2 and capital limitations that phase IN, then looking at taxable income minus capital gains, and the exclusion can't be more than 20% of that figure. Everyone got that? I'd rather calculate AMT by hand, or do the five lump-sum Soc Sec worksheets with a pencil. Just calculating the income tax is impossible at this time. The new rates that apply to each bracket of income have changed. The chunk of income that used to be taxed at 10% is now taxed at 12%, the amount at 15% is now 12%, and so on. There is not yet a calculator to do this. The media is full of calculators but I wouldn't trust them. If the IRS and professional groups have not yet released one, how did the media act so fast? My hunch is they are designed to capture your personal info like income and filing status for the sole purpose of adding these tidbits to the dossier they already keep on each of us like browsing history, purchases, pets, and other lucrative details. 1 1 Quote Link to comment Share on other sites More sharing options...
Randall Posted January 19, 2018 Report Share Posted January 19, 2018 10 hours ago, SaraEA said: WHAT A CONVOLUTED MAZE! Seems like a given. What seems like a good idea still has to be formatted somehow. 1 Quote Link to comment Share on other sites More sharing options...
Abby Normal Posted January 19, 2018 Report Share Posted January 19, 2018 12 hours ago, SaraEA said: 10% is now taxed at 12% The 10% brackets remained the same, just adjusted for inflation. 2 Quote Link to comment Share on other sites More sharing options...
DANRVAN Posted January 19, 2018 Report Share Posted January 19, 2018 On 01/16/2018 at 5:23 PM, SaraEA said: I was at a seminar on Monday and the instructor (a JD), said he thinks rentals qualify but will withhold saying so definitively until IRS issues clarification. There is A LOT in this law that favors real estate owners....... In general, I don't believe real estate rentals will qualify unless the taxpayer can rise to the level of a real estate professional. Otherwise they do not meet the trade or business requirement of section 199A. Since "trade of business" is not further defined by TCJA or 199A, case law will prevail in definition. On the other hand, in regards to the business interest limitation, both the TCJA and revised code 163(j) specifically refer to section 469(c)(7)(C) in defining real estate professionals who are exempt from the limitation as a trade or business. So it appears to me that any rental activity that can clear the 469(c)(7)(C) hurdle gets the 199A deduction. 1 Quote Link to comment Share on other sites More sharing options...
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