Let’s quickly discuss how the new tax code affects real estate professionals.
The Tax Cuts and Jobs Act of 2017 created a 20 percent tax deduction for some types of pass through businesses. However, certain professionals — like attorneys, consultants, financial advisors, and brokerage services — were limited in their ability to use the deduction.
Real estate agents were among the professionals to get swept up in the confusion because the term “brokerage services” remained ambiguous.
But there’s good news! The IRS issued a clarification: Services provided by “real estate agents and brokers, or insurance agents and brokers” are eligible for the deduction.
Real Estate Pass-Through Deductions Under The New Tax Code: Profit Standards and Considerations
The real estate pass-through deduction is income dependent. Agents and brokers who make less than $157,500 annually automatically qualify for the 20 percent deduction. Same goes for couples, filing jointly, who make $315,000 or less. Brokers who make more typically calculate using Q-2 wages.
Despite the real estate pass-through clarification, many landlords who collect rent under triple net leases still aren’t sure if they qualify for the 20 percent deduction. Whether or not a business structure meets the standard for an active “trade or business” is the determining factor.
Connect With A Chicago Tax Lawyer Today
The Gordon Law Group is a full-service tax law firm that works with individuals and businesses in Chicago and throughout Illinois. We handle everything from basic tax preparation to complicated international accounting and investment reporting. We also help people who are under investigation by the Internal Revenue Service or Illinois Department of Revenue.
Our team members have built solid relationships with agents and officers at various government revenue offices. These associations consistently prove invaluable to our clients. After all, settlements often come down to negotiations — and negotiations are smoother when both parties are friendly and familiar.
Get in touch today to begin the conversation. Our knowledge and experience will get you where you want to be.