Maximizing Your 2018 Real Estate Deductions
Bryan Zuetel
Now is the time to consider your 2018 real estate tax deductions. As the year is coming to a close, you can best finalize your real estate related expenditures. Have you made the necessary tax preparations for the end of the year? How are your investment properties? The Tax Cuts and Jobs Act passed at the end of 2017 brought many tax code changes, including some that affect your real estate.
Section 179 deduction: Non-residential real property placed in service this year may benefit from the expanded definition of Section 179 property. That section allows the taxpayer to include certain interior property improvements to take 100% of those improvements as a depreciation deduction. Qualified property is property placed in service during 2018 and used predominantly (more than 50%) in your trade or business.
SALT deduction limit: After the Tax Cuts Act, state and local property taxes are generally capped at a maximum $10,000 deduction. In California, this will probably leave some of your property taxes and state income taxes as non-deductible. Note that this deduction limitation only applies to property taxes for a primary or secondary residence, not an investment property (where mortgage interest and property taxes remain fully deductible). California taxpayers and property owners should anticipate this tax change and plan accordingly with additional, available deductions.
Qualified business income deduction: Taxpayers with qualified business income (which should include rental income) may be eligible to take a tax deduction of up to 20% of the qualified business income from a pass-through business entity (sole proprietorships, LLC’s, and S-corporations). Generally, the taxpayer will be able to capture a full 20% deduction on rental income, subject to certain restrictions for higher income levels. This deduction is complicated and has many variables for deductibility.
Need a real estate tax professional? We can refer you to professionals that specialize in real estate tax. Need a real estate attorney to draft your documents before the year end? Contact us, and we can help. Want to sell your investment property or second home within the United States? WE DO THAT!