I followed some news about trump tax bill. it allows pass-through tax rate of 20% for LLC and S-corp. It even allows it for schedule-K. But I don't find anything about schedule-E for pass through rate at 20%.

assuming your tax bracket is above 20%, shouldn't landlords start setting up LLC's to take advantage of the new tax rate of 20%?

matt TX I would agree with only one part of CT rage-- wait for the dust to settle. Study on it - read on it.

cjo'h after 8 years of do-do bird in White House we need to give our current man more than a year to straighten out EVERYTHING thats been screwed up. He's done much in 1 year. He has attained what we here as LL's always look for-- RESPECT- can you make everyone happy-- not on your life but he's working on it.

His big problem as I see it -- is his constant verbage about putting people back to work again-- Mr. President what makes you think people want work-- we all know it's hand outs that are keeping people down. why work when you can get more with a check in the mail from UNCLE SAM?

Those light bulbs have put out just enough heat to keep some pipes from freezing for years for me. Right now it is -12 degrees where I am, I don't have a problem with global warming.

One should avoid making long-term business decisions based solely on laws that can change with the stroke of a pen. Yes, LLCs look to gain some tax benefits, and as all of my properties are already in an LLC that may help me. But I did an LLC for other reasons. This will be icing on the cake, not the cake itself. There are rules for LLCs that might, depending on your state laws, make it more costly or burdensome to have an LLC even with a substantial tax benefit. Consult with your CPA and attorney before making any decisions.

An interesting idea; I agree with seeing what shakes out with respect to technical corrections and actual implementation of the new law.

When I first owned income property back in 1978, the depreciation schedule was only 15 years long. Then it changed to 27.5 years taking almost twice as long to write things off.

Robert CA why would I want to show profit?

I disagree with many of the above posters.

I've searched the internet & got several CPAs opinions as well as law professors analysis & other accounting service opinions, all saying individual rental real estate reported on Sch E qualifies for the 20% reduction on total rental net profit.

Some of the sources are:

Individual Tax Planning Under The Tax Cuts And Jobs Act Of 2017

Thomson Reuters Tax & accounting News

Evergreen Small Business

Selden Gox CPA

TaxProTalk

Watson CPA

Law Professors from Michigan Law School,NYU School of Law, & about 14 other tax scholars,practitioners, and analysts.

KPMG

So I conclude individuals will get the pass thru benefit.

When filing time comes I expect my CPA will have the application details.

It's extremely sad how many regulations the previous admin placed on businesses. I really don't know how businesses functioned over the 8 years of the last admin. The best tax option would be the flat tax or fair tax of a flat rate of 23%. However to do this there would have to be changes to two constitutional amendments AND the IRS would be history. Unfortunately this most likely will not happen but theres always hope for it too happen. With a Fair Tax money can exchange hands under the table; handyman work, rental payments, etc. When the person buys a products that are taxes 23% they will pay the fair tax of 23% with no other added taxes. Of course real estates taxes will be gone too.

Allym of NJ, be extremely careful with the information you put on facebook it can become an issue for you in the future. That can be said for any website on the Web.

Look at the history of social security and how over the years its not the best solution for retirement. BY the way it was never meant to be a depend all for a retirement fund. The last 6 years our health care is going in the same direction as social security and not a very good direction...

CONSIDER this how many of your tenants can afford to buy the number of houses and/or multi units each of you own? Its very possible that some tenants will own a house in the future will they own rentals maybe? maybe not? The same is true with any business from A to Z including the rental business. The tax base for businesses needed to be cut so business can reinvest in its own business and/or expand business. How many tenants and employees of businesses will mortgage everything they own work 60 hours a week to build a business. Then get over regulated and over taxed and still continue to do business in that environment? There should have been more of a tax cut to help small and large businesses to expand, hire more people, create a new product line. The Reagan Admin cut taxes especially depreciation from 30 years to 15 or 18 years that helped the real estate industry.

Over the next 3 years and maybe 7 years I bet there will be several of the Landlords/owners the poster and readers will purchase more real estate and expand their business.

NE of PA, BRAVO!!! You are living the American Dream and you really could careless about the tax base because you are moving forward with your next real estate purchase AND Ken of NY is making it happen, too.. The next Flip, the next Foreclosure, the next cash cow. Some of you may be self financed and others maybe mortgaged using O.P.M. in 2018 will be your best year yet.

Best of Success to each of you in your rental business with 1 rental or 100 plus rentals. Or like Roy of AL I think he owns the city block and now is working on the county, Mr Roy County of AL...

The Skys The Limit and the only road block is yourself no one else OK sometimes the pro tenant judge... BUT thats a minor set back if any...

LLC's are pass-through businesses. They are a corporate structure that avoids the double taxation of paying personal and business taxes which means that their tax rates are applied at personal rates.

LLC's for rental properties do file 1065 at least mine does. I also file a Sch C since one of my other LLC's is a single partner which for tax purposes is treated as a sole proprietor. Both structures will be taxed at individual tax rates less a deduction of up to 20% to make the rate lower.

This was a last minute concession to the tax bill otherwise small businesses would have been paying higher rates than large corporations.

Because of depreciation, many rental businesses have minimal on paper profits now. But then the depreciation is recaptured at 25% when the property is sold. With the time value of money considered 25%, 10 spread out over years is effectively less than 25%.

I pay my accountant to deal with this.

TA:

You cannot avoid depreciation recapture tax. The tax law requires that recapture be calculated on depreciation that "was allowed or allowable". So whether you depreciate or not you will still be taxed on it and at the same rate. If I am going to be charged for it I may as well take advantage of it.

As for Sid's comment about not changing our business based on these tax changes. I agree. This tax bill was rushed through before anyone, even those who voted for it, had a chance to examine it. One flaw that has been been mentioned in several articles is a loophole where someone with a big payout in passive income (think real estate) could game the system and pay zero taxes. Once the IRS has the time to study the entire plan there will certainly be changes.

I don't agree that if the mid-term's change the majority in Congress the tax bill changes could be short lived. There are too many other issues they will choose to address and since most of the changes from this bill have a sunset clause there is no real incentive to make this their top priority. If there were any changes they would probably focus on child care, education and home ownership.

One thing is for certain...if it was truly their intention to simplify the tax code they failed miserably. Under normal circumstances I wouldn't consider doing my own taxes and this year with many of the provisions of the new plan going into effect on Jan 1 the need for an accountant has become an absolute necessity.

I agree with Chris CT. I've been thinking about this post and several other posts like it.

It's not worth my time to try to understand this stuff.

It's kind of like hiring a framer or hardwood floor installer or electrician.

I want to know the task at hand and I want to know that it's done right. I don't need to know the species of pine used in the framing or whether or not it's #2 or prime.

I don't need to know if my hardwood floor guy used staples or nails to install the hardwood floor or whether or not it's a Bostich nailer. I need to know it's done right and that I AM SECURE with it.

I don't need to know what brand panel the electrician installs, only that it's the correct amperage for the job. I don't worry about his brand of tools, favorite wire nuts or electrical tape. I want it safe and I want to be protected from it.

I want my tax return safe and I want to be protected from taxes.

Coplin-

My acct. also told me to accelerate donations and taxes on my personal property but not on our rentals since property/state tax deduction $10,000 cap only applies to owner occupied homes. The cap applies to itemized deductions...as in owner occupied properties. For rental properties these are not itemized deductions rather they are deductions used in computing net rental income.

Marv, just saw this about NY:

"Governor Andrew M. Cuomo has signed an emergency Executive Order to assist New Yorkers who wish to prepay next year’s property taxes this year, before the new federal tax law changes take effect. Payments must be made or postmarked on or before December 31, 2017. For more information, contact your local tax collecting officer.

It will be different county by county. In many states the tax bills are already out for 2018. When these are paid, they are deductible. Others will be decided on a county by county basis.

But...so many people will be deducting RE tax, there is no way the IRS can audit all of them. Very few people will be audited and lose the deduction.

Marv wrote: "The new law specifically says you cannot prepay your 4th state estimate before the end of the year and deduct it."

Yes, but the new law takes effect on January 1st, right? Isn't it correct that under CURRENT law, you can do that? (I'm not, so it doesn't matter to me. I just see a LOT of places pushing to do it -- and it seems like you CAN do it this last time, correct?)

- John...

FOLLOWING IS A STATEMENT FROM THE IRS REGARDING PREPAYING PROPERTY TAXES:

John MI Here is a copy/paste from law H.R.1 page 33 under Limitation on deduction for state and locan., etc. taxes. Note the last sentence.

.

"The preceding sentence shall not apply to any foreign taxes

described in subsection (a)(3) or to any taxes described in

Agreed. Doesn't matter for me. The only thing I paid early was my property tax for my personal home. But it is issued in early December and due by March, so I'm completely within the IRS guidelines to pay it "early" since it was assessed in 2017.

So, no worries from me. Thanks.

- John...

Marv [IL]:

Pg 67 Passthrough entities and sole proprietorships

Deduction of 20% for certain passthrough income

For tax years beginning after December 31, 2017... a deduction for 20% of the individual’s domestic qualified business income from...sole proprietorship.

...Qualified property means tangible property of a character subject to depreciation ...is used at any point during the tax year in the production of qualified business

income;

Sched E rentals satisfy these requirements.

Hope this helps.

Per your quote... "business income" . Rental income is not business income it is investment income. Rental income is not included on Sch C (sol proprietorship).

A special webinar will be held Thursay, January 4th, which will cover many of the aspects of new tax bill and how it will impact landlords. There are several aspects which are VERY GOOD for landlords and can add tens of thosands of dollars to your bottom line if you learn how to take advantage of them. For info on the webinar, go to

iralawyer.com/newtaxmrll

marv:

Rental income is business income if you meet the IRS definition of a real estate professional:

-more than one-half of the personal services the taxpayer performs in trades or businesses during the tax year are in real property trades or businesses in which the taxpayer materially participates, and