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What the Section 199A is about in new Tax Cuts and Jobs Act tax reform

Written by Justin Prusiensky

Apr 3, 2019

April 3, 2019

Estimated Reading Time: 2 minutes 15 seconds

Dear Landlords & Real Estate Titans:

The Tax Cuts and Jobs Act tax reform added new tax code Section 199A, which created a 20 percent tax deduction possibility for you if your rental property (a) has profits and (b) can qualify as a trade or business.

What are the benefits of the new Tax Cuts and Jobs Act tax reform for rental property?

As the law now stands, with rentals that achieve trade or business status, you win. Your business-status rental property creates the following five possible tax benefits for you:

  • Your rental property can create a Section 199A tax deduction of up to 20 percent of the rental property’s qualified business income.
  • Your rental property receives tax-favored Section 1231 treatment, which (upon sale) delivers with a tax loss—an ordinary loss (the best kind of loss)—and with a tax-favored capital gain (the best kind of gain).
  • Your rental property can create the home-office deduction if you meet the other home-office requirements of exclusive and regular use.
  • Your rental-business status creates rental property deductions for the cost of your attendance at rental property meetings, seminars, and conventions.
  • Your rental-business status enables Section 179 expensing for certain assets used in the business (special rules apply to the real property).

If you would like to discuss your rental property’s status as a trade or business or any other aspect of the rental, please call me on my direct line at 980-237-1714.

Sincerely,
GP CPA P.C.

     

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    First off, the funds are expected to be spent before the end of 2021, as an annual report to the SBA will be required at some point in the future. We are still waiting for guidance from the SBA regarding what this annual report will look like. It may make sense to draft a spending plan or budget to make sure all of the funds are spent on time and in accordance with the program rules. GP CPA can help you with this planning, so you can prevent a surprise surplus of funds. Spend wisely and timely!

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    GP CPA offers a wide range of business advisory services that are tailored to the needs of business owners. For those small businesses who need someone to keep the books, we can do that.

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