Will Landlords Benefit from the 20% Pass-Through Deduction?

Posted by Hannah Lapin on Feb 23, 2018 11:28:53 AM

20% Pass Through Deduction for Landlords

The 20% pass-through deduction in the new Tax Cuts and Jobs Act is one of the most complicated tax changes in history, leaving lots of room for interpretation. With this new reform, pass-through businesses, such as LLCs, S-corps and partnerships, can potentially deduct 20% of their business income, which therefore, could be a multimillion-dollar tax break. So how does this reform affect landlords, and will they benefit?

To put it simply, landlords are only eligible for this 20% deduction if they finance their properties through a pass-through business. Before you go off and get incorporated, it is important to note some other stipulations that would prevent landlords from seeing significant tax benefits. If landlords are already generating a tax loss on their rental properties due to depreciation, the 20% deduction becomes a moot point. Additionally, the limitations are $315,000 for joint filers and $157,000 for any other filer.

On the other hand, if landlords have owned their investment properties for a long time and have already recognized much of the available depreciation, the 20% pass-through deduction could be highly beneficial. If you are interested in learning more about forming an LLC to take advantage of this tax reform, see our blog post How Landlords can Form LLCs and Reap Tax Benefits

To learn more about the new pass-through tax deduction, visit NOLO, and to learn more about landlord taxes and tax deductions in general, visit our Tax Page.

For more landlord and investor resources, browse our Investor Resources.

Download Landlord Benefit Guide

Related: Bonus Depreciation and Section 179 of the New Tax Code, 5 Tax Deductions Every Landlord Should Know AboutHow Landlords Can Form LLCs and Reap Tax Benefits in 2018

Topics: Taxes