Author Topic: Real estate investors and Sec. 199A deduction (link to SF Chronicle article)  (Read 497 times)

SeattleCPA

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Kathleen Pender, a writer for San Francisco Chronicle, did a good summary of how the new Sec. 199A deduction works for real estate investors:

https://www.sfchronicle.com/business/networth/article/How-real-estate-investors-can-cash-in-under-new-12491965.php

If someone is still learning the new law, might be useful read.
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bacchi

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Thanks.

That >$157.5k formula isn't pretty. The tax program will do it but damn.

SeattleCPA

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Thanks.

That >$157.5k formula isn't pretty. The tax program will do it but damn.

After talking with Kathleen for the article and then another CPA putting together in-firm training materials, I tried to do a blog post this weekend that really broke down the phase-out calculations:

Sec. 199A Deduction Phase-out Calculations

If someone needs to know how those work, the post makes it pretty "step-by-step" .
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midwesterner1982

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Thanks for posting this.  So if I understand correctly, if I had rental property net income of $10,000 I could deduct $10,000*.20=$2000 from my form 1040, after AGI.  Is that correct?
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Mr. Boh

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Yet another great link SeattleCPA.

Does anyone know when there will be more clarity on weather schedule E income qualifies for the deduction? I'm guessing that the government shutdown will only prolong the delay in answering this question.

I have been contemplating setting up a LLC for my two rental houses to qualify as a pass through entity. As of today I am paralyzed with indecision. I would rather continue filing schedule E but I don't want to miss out on the free money if this is not in fact considered pass through income. As a practical matter, if schedule E income was not pass through income, and a LLC was in place for only half of the year, would I be entitled to only half of the deduction (10%)?

SeattleCPA

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Yet another great link SeattleCPA.

Does anyone know when there will be more clarity on weather schedule E income qualifies for the deduction? I'm guessing that the government shutdown will only prolong the delay in answering this question.

I have been contemplating setting up a LLC for my two rental houses to qualify as a pass through entity. As of today I am paralyzed with indecision. I would rather continue filing schedule E but I don't want to miss out on the free money if this is not in fact considered pass through income. As a practical matter, if schedule E income was not pass through income, and a LLC was in place for only half of the year, would I be entitled to only half of the deduction (10%)?

You don't need an LLC to create the pass-thru income. Like income from a Schedule C (sole proprietorship) and Schedule F (farmer or rancher), Schedule E rental income is automatically qualified business income.
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jinga nation

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Yet another great link SeattleCPA.

Does anyone know when there will be more clarity on weather schedule E income qualifies for the deduction? I'm guessing that the government shutdown will only prolong the delay in answering this question.

I have been contemplating setting up a LLC for my two rental houses to qualify as a pass through entity. As of today I am paralyzed with indecision. I would rather continue filing schedule E but I don't want to miss out on the free money if this is not in fact considered pass through income. As a practical matter, if schedule E income was not pass through income, and a LLC was in place for only half of the year, would I be entitled to only half of the deduction (10%)?

You don't need an LLC to create the pass-thru income. Like income from a Schedule C (sole proprietorship) and Schedule F (farmer or rancher), Schedule E rental income is automatically qualified business income.
+1. That info is at the end of the article... had to read till the very end. And thanks for the info.
Now to have wifey CPA translate IRS gobbledygook to my engineering head...
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GU

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Do SMLLC's that are DRE's count as passthroughs for the new passthrough deduction (assuming all other conditions are met)?

SeattleCPA

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Do SMLLC's that are DRE's count as passthroughs for the new passthrough deduction (assuming all other conditions are met)?

Yes. I believe so.
My blog Evergreen Small Business
My free downloadable ebook: Thirteen Word Retirement Plan

GU

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Do SMLLC's that are DRE's count as passthroughs for the new passthrough deduction (assuming all other conditions are met)?

Yes. I believe so.

Thank you.