Tax Planning

Tax Reform Act and Real Estate Investors

Toby Mathis
Toby Mathis is a founding partner of Anderson Law Group and current manager of Anderson’s Las Vegas office. He has helped Anderson grow its practice from one of business and estate planning to thrive tax practice and national registered agent service with more than 18,000 clients. In his work as an attorney, he has focused exclusively on areas of small business, taxation, and trusts. In addition, Toby was the past director and host of the longest-running local business radio program on KNUU in Las Vegas “The BOSS Business Brief”. He sits on the board of directors for several companies and was recently appointed to the local board of Entrepreneurs’ Organization, a worldwide association of owners of successful businesses. He has authored more than 100 articles on small business topics and has written several books on good business practices, including first and second editions of Tax-Wise Business Ownership and 12 Steps to Running a Successful Business.

by Toby Mathis

Earlier this year, President Donald Trump signed into law H.R.1. – An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for the fiscal year 2018, or more commonly known as the tax reform bill. Touted as the biggest tax reform seen in the past 30 years, this Act affects every class of taxpayers and businesses, and most notably, real estate investors.

Read the full H.R. 1 Tax Reform Act on

Here are three of the many benefits real estate investors can utilize, in general, starting in 2018. As always, consult with your tax professional to see how your individual tax bill may be affected. And, if you would like to optimize your business structure to get the most benefit out of this reform, we’ve listed three ways you can do that at the bottom of this article.

Lower Individual and Corporate Income Tax Rates

The maximum marginal income tax rate will be lowered to 37% from 39.6% for individuals and long-term capital gains for individuals remains steady at 20%.

The corporate tax rate will be lowered to 21% from 35%. Combined with the 20% maximum tax rate on qualified dividends paid to an individual shareholder from a C corporation, the income tax rate for a C corporation’s distributions will be 36.8%.

Deduction for Pass-Through Entities’ Qualified Business Income

Individuals with qualified business income from a pass-through entity will receive up to a 20% additional deduction on that income. Combined with the lower individual income tax, in theory, this could mean a maximum marginal tax rate of 29.6% if you’re eligible for the full deduction. Limitations apply so be sure to confirm that your situation is eligible.

Increased and Expanded Depreciation Deductions

In what’s been called a major victory for landlords, residential rental property owners can now deduct the cost of personal property, such as appliances and furniture, used in rental units. Additionally, receive up to 100% bonus depreciation, phased down yearly until 2026, on both new and used business-use personal property.

Next Steps

A thorough review of your entity structure by a professional team experienced with real estate investing is absolutely critical to ensure you receive the most positive impact from the passage of the tax reform bill. Restructuring early in the new year could improve your tax situation and now is the perfect time to figure out how.

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