How the New Tax Code Affects Real Estate Investing

Are you planning on getting started with real estate investing but you’re not sure if recent changes to the tax code will affect you?

In this article we will provide you with several examples on how the tax code affects you, so you will know what to expect when you file your taxes next April.

Low Tax Rate

Thanks to the recent changes to the tax code, you may be end up paying lower taxes this year than you did for the previous year but, individuals who are in the top 33% of the income tax bracket may unfortunately end up paying more taxes.

Here’s an example:

2017 – 25% – $37,951 to $91,900

2018 – 22% – $38,701 to $82,500

New Pass Thru Tax Deduction

One of the biggest changes to the tax code that we’ve seen in the last 12 months is the pass thru deduction. This new deduction is available to just about everyone including: sole proprietorships, partnerships, LLC’s and S-Corps but C-Corporations are excluded.

Since the pass-through deduction is a deduction of up to 20% of your business income, this deduction is effectively a 20% tax cut!

Expanded Section 179 Deduction

Another big change to the tax code is the 179-tax deduction. With this tax deduction, business owners and real estate investors can reduce their taxable income right away and essentially benefit from lower taxes sooner rather than later.

Note – Interest expense is still deduction but, deprecation may change!

As you know, most real estate investments are debt financed and in the past business interest was always fully deductible. Under the new tax code, limits have been imposed on business interest deductions.

The good news is that most real estate businesses may be able to qualify for the same deductions that they qualified for in the past but some restrictive depreciation rules may apply.

Contact Strategy Properties

To learn more about how changes to the tax code affect you, or to view investment opportunities in Detroit, contact Strategy Properties today by calling us at (734) 224-5454 or connect with us online through our website strategyproperties.com

Disclaimer

The information which is summarized in this article does not constitute financial or other professional advice and is general in nature. It does not take into account your specific circumstances and should not be acted on without first consulting with a fully qualified financial advisor.