Tax Alert: New Tax Law Benefits For Real Estate Investors

[Chetan Dogra]

Real estate investors retained almost all of the existing benefits in new tax law, but there were some changes to pay attention to:

Most real estate investors own property personally or in an LLC, in both instances taxes are paid on a personal return. The new tax law is a win with its reduced personal tax rates.

Perhaps the biggest new tax-break for small businesses is the 20% pass-through deduction. But will real estate investors qualify? The answer is murky. People who flip houses should be fine. But rental property investors will need to qualify as a trade or business: engage in your business with regularity and continuity.

The new tax law has increased depreciation for personal property-can 100% depreciate in the first year. Creative investors may also use cost segregation to dip more.

Opportunity zone fund, a new opportunity, is perhaps the most innovative and profitable tax law change for real estate investors. Capital gains can be deferred and may qualify to be excluded permanently.

Both property taxes and mortgage interest deductions are now limited for a primary residence. But rental property taxes and mortgage interest are still deductible.

Disclaimer: This discussion is not a tax advice.