How Real Estate Agents Are Affected By The New Tax Laws

How Real Estate Agents Are Affected By The New Tax Laws

In January 1st, 2018 the United States passed the most significant piece of tax reform legislation in the last three decades. This massive legislative change to taxes effects numerous things, including real estate. As a real estate agent you might be wondering, how does this affect me? Based on the numbers it looks like the

In January 1st, 2018 the United States passed the most significant piece of tax reform legislation in the last three decades. This massive legislative change to taxes effects numerous things, including real estate. As a real estate agent you might be wondering, how does this affect me?

Based on the numbers it looks like the tax reform is going to support the real estate market. However, as an agent, there are some changes you should be aware of into the future. 

Depreciation

Qualifying property acquired after Sept. 27, 2017, is eligible for 100% bonus depreciation in the year it is placed in service. Qualifying asses include those with a depreciable lifespan of 20 years or less; this includes personal property

It’s also important to know that bonus depreciation will start to slow down beginning in 2023. The rate will fall by 20 percent per year beginning in 2023 until 2027 when it is ultimately eliminated.


Pass-Through Entities

It was big news that the tax bill changed corporation tax from 40% to 21%. If you are apart of pass-through entities such as an LLC, S corporation, or partnership, then you’ll be taxed differently.

A 20% deduction of qualified business is now permitted. The deduction is limited to 20% of qualified business income and the greater of 50% of W-2 wages, or wages plus 2.5 percent of the unadjusted basis of qualified depreciable property. This law benefits real estate businesses. 

Limitations on business

How the loss and gains from your real estate business are taxed have also changed. Any company with higher than $25 million in average yearly gross income over the previous three years will be restricted in its investment cost deduction to interest income plus 30 percent of adjusted taxable income. Rental property owners can sometimes opt out of this rule and claim full interest on deduction.


This new tax law has been in effect for almost a year now, and real estate agents are feeling the benefits thanks to these new laws. Predicting the lasting impact of these changes can be hard to track, but overall this has been a win for real estate professionals.

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