Trump Tax Code changes affecting REI?

Question

Just saw this article on the potential changes to the tax code which would impact REI. How would this affect the different real estate strategies like BRRR, multi-family, etc.?

https://www.nytimes.com/2017/04/22/business/trump-...

Chris Masons · Answer

Seems property taxes on your owner occupied home you live in is what is being proposed to be eliminated....

From a rental property standpoint taxes are one of the bigger benefits that are allowed to be deducted and I can't see Trump wanting to do away with this very lucrative tax deduction.

To clarify property taxes from investment property would go on your Schedule E not where you would deduct your owner occupied property real estate taxes...

Maybe a Tax professional can chime in?

regards,

Chris

Michael Jones · Answer

Maybe I am missing something.... My number one expense is property tax. I own 2 duplex one SFR, and am planning more.  Can anybody say that the proposal doesn't affect rentals?  All I see is that it is being done away with.  This would absolutely kill me.  I don't see how any of this helps me.  I am a conservative so trying to find a positive about this......

Derrick Dill · Answer

All itemized deductions except mortgage interest and charitable contributions will be eliminated. State and local tax deductions eliminated, no property tax deductions. This will effect landlords in states with high property taxes like NY and California negatively.

Derrick Dill · Answer

Christina,

Unfortunately, all that is available is speculation on his tax reform. They'll be formally releasing it on Wednesday. It would be most appropriate to discuss it when his proposals are concrete instead of speculation.

Denise B. · Answer

My understanding is that only the property taxes that you deduct on your personal home would be impacted.  The property taxes related to your rental properties are a business expense on Schedule E and not itemized deductions.   I'm not an accountant but that's how I'm reading it.

Ricardo Fainsilber · Answer

@Michael Jones I see it the same way. If we loose the property tax deduction, then what good are the rest of the tax reductions proposed?

Derrick Dill · Answer

That is what he is proposing already, it is just the outline of his tax plan and could change. As of now, property tax deductions will be eliminated:

"Here's a rundown of the itemized deductions this plan would cut:

• Deductible state and local taxes: Currently, individuals are allowed to deduct theirstate and local taxes from their federal tax payments. This includes:
• Personal property taxes: Allows deductions of state and local taxes on items like a boat or car.Real estate taxes: Allows deductions of state and local taxes on the "value of real property."Income taxes: Allows deductions of taxes on wages and other income paid to the state or local government.Sales taxes: Can deduct sales taxes paid instead of income taxes. This is mostly used in stats without a state-level income tax like Texas.
• Personal property taxes: Allows deductions of state and local taxes on items like a boat or car.
• Real estate taxes: Allows deductions of state and local taxes on the "value of real property."
• Income taxes: Allows deductions of taxes on wages and other income paid to the state or local government.
• Sales taxes: Can deduct sales taxes paid instead of income taxes. This is mostly used in stats without a state-level income tax like Texas.
• Gambling losses: Losses due to legal gambling can be deducted currently, as long as they are itemized.
• Interest expense: Interest paid on a debt, such as a student loan or mortgage, can be currently deducted. You cannot deduct interest on a personal car loan or credit card debt.
• Union and/or Club expenses: If membership in a union, professional society, or chamber of commerce "helps you do your job," the membership fee can be deducted.
• Moving expenses: If you moved for a new job, the cost of moving can be deducted if itemized.
• Miscellaneous expenses: If an expense on the Internal Revenue Service's list, including tax preparation fees and unreimbursed employee expenses, accounts for more than 2% of a filers gross income, it can be deducted.

• Personal property taxes: Allows deductions of state and local taxes on items like a boat or car.
• Real estate taxes: Allows deductions of state and local taxes on the "value of real property."
• Income taxes: Allows deductions of taxes on wages and other income paid to the state or local government.
• Sales taxes: Can deduct sales taxes paid instead of income taxes. This is mostly used in stats without a state-level income tax like Texas.

The Trump outline is not a finalized plan, and the White House said they could change the plan as they work with Congress, so it is not a guarantee if these deductions will ultimately be"

Reference:

http://www.businessinsider.com/trump-tax-cut-plan-eliminated-itemized-tax-deductions-2017-4

Kevin Williams` · Answer

I highly doubt that he will be removing property tax deductions, especially since his own portfolio is heavily based in RE.

Jeremy Paris · Answer

From what it looks like now, they are saying that they will be removing all deductions except for mortgage interest. Am I reading that right? But as a business, your income would be reduced to 15%. I am still very unclear if this is good or bad for buy & hold or flipping.

Trump Tax Code changes affecting REI?

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