New Tax Law - Big Boost for Small Investors

[Account Closed]

This intended only to open discussions on the changes that affect investors. This is to help you know what questions to ask your CPA so you can do a better job of tax planning. I am not a tax guy or a tax attorney so this is simply a list of things you may want to consider talking with your accountant about.

1) Are you conducting yourself as a "Trade or Business" - if you are not, you are missing out on the greatest deductions and benefits. A "fix & flip" or "actively managed buy & hold" are generally good to go. Wholesalers may fall out of being a "Trade or Business". Passive investors (living off of dividends, etc ) may fall out of being a "Trade or Business".

2) If you make less than $157,500 yearly filling single or less than $315,000 married filing jointly, you are in a "sweet" category and are most blessed. Thank President Trump. You get the best write offs and benefits.

3) If you make more than those amounts (bless you, keep it up) talk to your CPA. You can afford one. And you should plan ahead since the changes are substantial.

4) LLCs are "pass through" and don't really affect your bottom line.

5) Learn the Term - "199A: Pass-Thru Deduction" - it is your friend (Must be a "Trade or Business")

6) Keep *very good* records - NO co-mingling - if you don't know how to do this, have an account set up a system for you

7) If you Assign Contracts or Options, (Wholesaling) you probably are NOT a "Trade or Business" for Tax Purposes and are missing out on a lot of good deductions and benefits. Consider adding a "Trade or Business" to your line of work. 

[Natalie Kolodij]

Hi Mike

I'm not sure what your CPA told you but a few things here are off base....

Wholesaling is an active business and will qualify for the 20% pass through deduction

Additionally, it applies to schedules C,E,F- Meaning that you can have a business, rental, or farm and still qualify for this pass through deduction. An LLC has no impact on this issue.

There have been a handful of posts on the new tax legislation already going here on BP :)