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Learning, Sharing, and Teaching => Real Estate and Landlording => Topic started by: SeattleCPA on January 15, 2018, 06:54:33 AM

Title: Real estate investors and Sec. 199A deduction (link to SF Chronicle article)
Post by: SeattleCPA on January 15, 2018, 06:54:33 AM
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.
Title: Re: Real estate investors and Sec. 199A deduction (link to SF Chronicle article)
Post by: bacchi on January 15, 2018, 09:39:41 AM
Thanks.

That >$157.5k formula isn't pretty. The tax program will do it but damn.
Title: Re: Real estate investors and Sec. 199A deduction (link to SF Chronicle article)
Post by: SeattleCPA on January 16, 2018, 05:41:56 AM
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 (https://evergreensmallbusiness.com/sec-199a-deduction-phase-calculations/)

If someone needs to know how those work, the post makes it pretty "step-by-step" .
Title: Re: Real estate investors and Sec. 199A deduction (link to SF Chronicle article)
Post by: midwesterner1982 on January 21, 2018, 05:16:06 AM
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?
Title: Re: Real estate investors and Sec. 199A deduction (link to SF Chronicle article)
Post by: Mr. Boh on January 21, 2018, 04:12:06 PM
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%)?
Title: Re: Real estate investors and Sec. 199A deduction (link to SF Chronicle article)
Post by: SeattleCPA on January 24, 2018, 06:07:00 AM
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.
Title: Re: Real estate investors and Sec. 199A deduction (link to SF Chronicle article)
Post by: jinga nation on January 24, 2018, 06:41:54 AM
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...
Title: Re: Real estate investors and Sec. 199A deduction (link to SF Chronicle article)
Post by: GU on January 27, 2018, 09:30:13 AM
Do SMLLC's that are DRE's count as passthroughs for the new passthrough deduction (assuming all other conditions are met)?
Title: Re: Real estate investors and Sec. 199A deduction (link to SF Chronicle article)
Post by: SeattleCPA on January 29, 2018, 07:58:31 PM
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.
Title: Re: Real estate investors and Sec. 199A deduction (link to SF Chronicle article)
Post by: GU on January 31, 2018, 05:02:28 PM
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.