All Forum Posts by: Michael Plaks

@Lance Lvovsky - I agree with you, it seems that way. Two questions here, however. The definition of a lodging facility is unclear to me. It mentions an apartment house but not SFH. What do you think?

Secondly, regardless of 179, these items can be expensed under the bonus depreciation. Why do we even care about 179 which, unlike bonus depreciation, has net income limits?

Also, can we move this discussion to the new thread specifically for depreciation? This current thread got too long and dispersed.

@Todd Willhoite. Unfortunately, you're correct. Doubling of standard deduction removes the tax incentive for charitable donations, for a lot of people.

$14k is the threshold without mortgage interest. Without mortgage interest, even the current standard deduction was a better option often enough.

@Llewelyn A. - correct. This is accelerating depreciation, so all other rules apply. It lowers the basis, and it will increase capital gain / depreciation recapture.

Planning around NOL is case-by-case. By the way, NOL rules changed, too. No more carrybacks.

@Jeff Kehl - sorry, I do not know the answer on REITs. Will have to research.

@Joe R. - correct. If you pay 25% as salary, you qualify for 20% on the remaining 75%. And if you pay $0 salary - you qualify for 20% deduction on the entire profit, as long as you're under the threshold. However, you still must comply with the reasonable salary requirement for S-corps. 

The 20% deduction creates an additional incentive to minimize S-corp salary, on top of the incentive to reduce SE tax. The IRS is likely to address this unintentional consequence, especially since the entire Sch C income qualifies for 20% - which creates a disparity in treatment. Stay tuned for more IRS rules and more understanding from us, tax guys.

LLC is normally disregarded, reporting 100% on Schedule C and eligible for a 20% deduction on the entire profit. No need for the end-of-year distributions.

@Kyle J. - correct. Landlord without an LLC gets the 20% on his net income. It does sound too good to be true, I agree. But it is the fundamental feature of the tax reform: all forms of business except C-corps are treated as pass-throughs. Can I promise the IRS will not alter these rules? No, I cannot.

@Chase Gochnauer - yes, DPAD is out. You can indeed consider the 20% deduction as a replacement. 

@Joe R. - the answer is no. See details in the new 20% deduction thread.

Disagree with @Ashish Acharya on this one. 

There is no difference between the two methods when you sell. Either way, the basis of the fence will be zero, resulting in the exact same tax consequences.

@Bernie Keene

You can buy now. Since you signed a property management agreement, it appears that the property is "placed in service" and you can start deductions now, even without rent.

@Joe R.

Unfortunately, no. 50% of W2 is not "a larger option." It is a limitation on the 20% deduction. Since you remaining net profit is $0, your 20% is $0, and 50% of W2 does not matter. 

You could extract some 20% deduction by lowering your W2, but I would not do it without discussing with a tax expert first.

@Buddy Holmes

This actually belongs on the other thread - depreciation and Sec 179. But yes, it is 100% deductible in 2017 under the new bonus depreciation.

@Brandon Hall, @John Woodrich and other colleagues.

I feel this fantastic thread (thanks, Brandon!) is getting difficult to continue, due to being too long and too broad. I've started 5 separate threads and invite everyone to switch there and split topics accordingly.
1. Tax reform Thread 1 - Pass-through and 20% deduction
2. Tax reform Thread 2 - Depreciation and Section 179
3. Tax reform Thread 3 - Itemized and business deductions
4. Tax reform Thread 4 - New creative tax strategies
5. Tax reform Thread 5 - Miscellaneous

See you there!