Real Estate investors to benefit Under Proposed Tax Plan

President Elect Donald J. Trump has some huge tax implications planned for all Americans and U.S. businesses. There are still many moving pieces, but listed below are six areas of concern. You may want to think about these right now before you close your 2016 taxes, and in preparation for your 2017 taxes.

REAL ESTATE INVESTORS TO BENEFIT UNDER PROPOSED TAX PLAN
President Elect Donald J. Trump has some huge tax implications planned for all Americans and U.S. businesses. There are still many moving pieces, but listed below are six areas of concern. You may want to think about these right now before you close your 2016 taxes, and in preparation for your 2017 taxes.

All tax plan changes must go through Congress, even though Republicans control both houses, before implemented.

1) Your tax bracket may fall in 2017, so you may want to defer any 2016 income.

Trump proposes three basic tax brackets:

Bracket 1: 12% for individuals earning up to $37,500 and couples earning up to $75,000. No capital gains.

Bracket 2: 25% for individuals earning up to $112,500 and couples earning up to $225,000. Capital gains taxed at 15%.

Bracket 3: 33% or individuals earning over $112,500 and couples earning over $225,000. Capital gains taxed at 30%.

This tax plan is already controversial since it increases taxes on the poorest taxpayers who are at 10% now, and it is very different from the Trump 2015 proposed tax plan.

Currently, we have 7 tax brackets for individual taxpayers; from 10% up to 39.6%, with capital gains typically taxed at 15% and 20% for those in the 39.6% bracket. Additionally, there is 3.8% for Obama Care that Trump vows to eliminate. Talk to your tax adviser.

2) Explore becoming an independent contractor and forming an LLC or S Corporation for your investment business, due to Trump’s proposed big savings for 2017, where “all” business income will be taxed at a flat 15%. Right now, the corporate tax rate is 35%. Talk to your tax adviser.

3) If you are thinking of selling, you may want to do so before 2017. Forbes has suggested that some may save tax dollars by selling their investments in 2016. This does not apply to all taxpayers as it is a complicated scenario.

Some 1031 companies are concerned that Trump will eliminate the 1031 exchange to offset the low corporate tax rate. These companies many want to get a 1031 started right away. Talk to your tax adviser.

4) Drop buying assets for its depreciation write-off before the end of December. Trump’s plan gives business owners a no-limit, 100% write-off option for the year purchased, as opposed to the current multi-year write-off rules.

Currently, business owners can depreciate assets over 3 to 39 years depending on the asset, and receive an immediate 50% “bonus depreciation”. So you may want to wait until January. Talk to your tax adviser.

5) Consider increasing your 2016 donations as Trump plans to lower the limit on itemized deductions. Trump plans a $100,000 deduction limit for singles, and a $200,000 deduction limit for married couples. It is not clear whether charitable contributions will be subject to these limits. Talk to your tax adviser.

6) Trump promised to completely do away with the Estate Tax. His plan does allow for tax on appreciation, but it would be deferred and would only have to be paid if and when the asset is sold.

Families may want to discuss setting up trust accounts. A will goes to probate, but a trust does not. Currently, a single person can leave heirs an estate worth up to $5.45 million dollars without paying taxes, more if married. Anything above this amount requires a 40% tax obligation. Talk to your tax adviser.