CAlling BP CPA to write post to clarify new tax bill for landlord

13 Replies

@Mindy Jensen     Mindy it would be great if you can twist one of the CPA on BP to do a nice post on the effects of the new tax bill.. as I know the threads will start to run wild with you can do this you cant do that..

from what I glean and whats important to me.

1.. cant write off state income tax from federal.. that's a biggee for high tax states and conversely makes no tax states more attractive to those who can move.

2. limits property tax write off to 10k on personal resi.. that effects high tax rate states.. and high value states.

As I no longer have rental property I was not really tracking what it effects there.. but I was planning on selling my personal resi and getting the 500k tax free.. it looks like now I will have to hold one more year as I have only been in this home 4 years not five.

etc etc.

Jay, that makes sense but even with the Senate approving a bill last night we don’t know what the final version of the bill will be.

There are a number of differences between the House and Senate bills.

@Brian Schmelzlen   OK I jumped the gun I thought it was all final... sorry... you can tell how intuned to politics I am... too busy trying to keep my business running to worry about it..

although I think the 500k exclusion is going to stick and for sure the not being able to write off state income tax from federal.. that's a HUGE one for me.. over half my personal income comes from non income tax states and being a resident in Oregon I end up paying 10% tax on it and not being able to write it off.. like I said it will more than pay for my new home in Vegas.. in cash in 5 years..

Yes, it is true that we have a good idea about how major parts of the law will look based on similarities between the House and Senate bills.

Both eliminated the state income tax deduction, so that is gone. That one hurts, but my projections based off of the initial proposals showed in my case (and a lot of hypotheticals I ran for my firm’s tax blog) showed that most people still benefit due to lower tax rates, expanded tax brackets, benefits to business owners and investors, and elimination of AMT (which sadly was only modified and not eliminated in the amended Senate bill).

I was planning to sell my primary home this

@Brandon Hall   OH crap... I just looked at the exclusion and I did not see the 500k income dealy

so if you make over 500k  Adjusted gross anything above that is an offset on the 500k.  well that just wiped out my entire gain.

So Brandon let me ask you this.. to help avoid paying cap gain on my 500 k plus gain on my personal resi can I then turn it into a rental wait one year then sell and 1031 ???  as my income in the coming years will with gods help never allow me to take the 500k exclusion.

@Brian Schmelzlen   @Brandon Hall   Looks like I will be spending some serious money with my tax team LOL.. figuring this all out..

I have been maxed out on AMT for ever.. so that's good.. but I am thinking all of us that use LLC's so willy nilly may need to turn them into corporations... and get taxed at corporate rate instead of income flowing through LLC to personal ???

I haven’t checked the details of the amended Senate changes to 121 exclusion. Is it a phase-out over $500k of income (makes more sense than at 500k income you get 500k exclusion, but $1 more and you lose the whole thing)?

I was planning to sell my primary home this month. It was my primary residence from 2012-2015 before it was rented out from 2/2016 to 11/2017.

If I have a fully executed purchase agreement before the end of this month, do I have to pay capital gains tax if I close in 2018? Thanks in advance.

Jay, no.

S corporations are taxed at the same flow through rate as LLCs.

C corporations will have a lower 20% rate, but money is distributed as a dividend to you from the Corp is subject to income taxes again at your individual rates.

Flow throughs (sole proprietorships, LLCs, and S corps) under the Senate bill would receive a deduction of 23% of qualified income.

Yes, you should talk to your tax team.

I have already been busy talking to my clients, and I know it’s going to get a lot busier from here on out.

Oliver, the closing date is what controls the date of sale for tax purposes.

I don’t know if Treasury will issue regulations providing relief for people in your situation, but I would plan based on what you know and not hoped for relief.

@Brian Schmelzlen   in the docs @Brandon Hall   put together my reading of the exclusion is this

if you make 500k adjusted gross or less full 500k ... if you make more than 500k adjusted gross there is a dollar for dollar deduct.. so lets say my adjusted gross is 600k and I have sold my primary  and have 500k to exlude.. I would only be able to shelter 400k of it..

if my adjusted gross is over 1 mil... no exclusion at all... for all those that think this tax bill favors the high earners does not appear to be the case.. but who knows..  at the end of the day this is a great country and what ever my tax's are I will pay and work through it..

The most recently passed Senate Bill appears to change the depreciation schedule for real property placed into service in 2018 and beyond at 25 instead of 27.5 for residential, and 25 instead of 39 for commercial property.  Big difference for commercial property.  You also can deduct rather than depreciate some of the big improvements such as roof and hvac on commercial properties.  There's a bunch of additional changes to depreciation that I can't decipher just from reading the bill, or is cross-referenced and I haven't looked it up.  This stuff is starts on page 134.

Lost the home equity loan interest deduction.

Teachers can deduct $500 instead of $250 for school supplies, but this sunsets back to $250.

1031's preserved for real property, perhaps with some modifications (again, lots of cross-references to existing law).

Five of last 8 instead of 2 of last 5 for personal residence capital gains exclusion under section 121.

Looks like if your employer pays you for transportation related expenses involved in getting to work from home, those aren't deductible/pre-tax anymore (think parking, commuter benefits, etc.).

This is all from my quick skim of the bill, and not to be relied upon as legal or tax advice.

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