Author Topic: 199A Rental Safe Harbor  (Read 320 times)

SeattleCPA

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199A Rental Safe Harbor
« on: October 04, 2019, 08:04:17 AM »
Maybe folks already saw this, but IRS released the "final" revenue procedure that describes how the 199A rental safe harbor works:

https://www.irs.gov/pub/irs-drop/rp-19-38.pdf

Not many tweaks from the original.  New details include (1) They let you treat mixed use properties as a separate category if you want... (2) They provide a bit more procedural detail about what you can and can't group to hit your 250 hours (required to get the tax benefit)... (3) They don't make you sign an affidavit and include with your return.

The general sense of the tax practitioners who've watched this area closely? The safe harbor is harder and more difficult to use than the alternative, which is to determine whether your real estate activity rises to the level of a trade or business.

Notes for folks still learning this area of new law:

1. Section 199A says unincorporated businesses, S corps and real estate investors don't have to pay income taxes on last 20 percent of their business income.
2. Real estate investors need to have their real estate activities show regularity, continuity and a profit motive.
3. Lots of really complicated rules exit as to how this deduction works. (The actual law was "only" 20 pages long but the treasury regulations about how the law works now run over 400 pages. Ugh.)