The IRS officially began accepting tax returns for your 2018 taxes on Monday, January 28th. This is the first tax season where the Tax Cuts and Jobs Act (TCJA) is in full effect. This historic tax bill, which is over 500 pages long, contains substantial and confusing changes. We’ve broken down the parts of the bill that impact buy and hold real estate investors the most:
Section 179 of the tax code allows taxpayers to deduct the costs of certain types of property on their income without capitalizing it. Under TCJA, this benefit has been increased to one million dollars (previously $510,000). For landlords, structural home improvements such as roofs, heating, ventilation, fire protection and security systems are all eligible for the write off.
Bonus Depreciation allows businesses to deduct a percentage of the purchase price of eligible assets. This tax season, up until December 21, 2022, businesses can take advantage of a 100% deduction (formerly 50%).
Pass-through Business Legislation
For investors who hold properties through pass-through businesses (S Corps, LLCs, and partnerships), through TJCA you will now be taxed 29.6% on income (previously 37%).