While the Trump tax bill, or as it's officially known, the Tax Cuts and Jobs Act (TCJA), has been panned by many observers, it does contain some significant tax breaks for real estate investment. This comes as no surprise, given that the President is a huge investor in real estate around the world.
Before going too far, it's important that you plan on consulting with a tax professional for these tax cuts. This bill can be confusing and not something that the average person can understand. It's even complicated for professionals in the industry.
Bonus Depreciation for Real Estate Investors
You can get a 100% first-year bonus depreciation deduction. This will be retroactive to your 2017 filings. This tax break will last until 2022.
Lower Corporate Taxes
Lower corporate taxes can affect many of us who have incorporated our investment properties. Those earnings will now be taxed at a lower level. Pass through income through an LLC will get a 20% deduction on qualified income. This will make it easier for real estate firms to expand and for startups to become profitable.
1031 exchanges allow real estate investors to trade up and diversify their portfolios without an immediate tax hit. These deferments are protected by the tax law overhaul. Putting all of this together will allow for double-digit tax savings.
Retirement Account Savings
This savings will allow people to save a lot of money on their taxes through contributions to their retirement accounts. Education Savings Accounts (ESAs) and Health Savings Accounts (HSAs) as well as 401ks and IRAs will all see significant savings under this bill.
Forbes advises: "Many rules have changed with the passing of the Tax Cuts and Jobs Act. Some important ones didn't change. Some individuals need to urgently act to avoid a harsh tax hit this year and looking forward. This is especially true for those with new limitations on state and local income taxes and in high property tax states, though others may benefit under the new rules."
King Realty Group does not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.