If you were tuned to the news on August 8, you might have heard the IRS released proposed regulations on the new 20 percent business income deduction for pass-through businesses.
The deduction was part of the big tax reform law Congress passed at the end of last year and it was a huge win for REALTORS®. But it was unclear who would be eligible for the deduction. Now that proposed regulations are out, it’s clear the new deduction will be available to a wide range of real estate professionals.
Under the new law, individual owners of sole proprietorships, including independent contractors, and owners of S corporations, LLCs, or partnerships, can take the 20 percent deduction on their net qualified (that is, ordinary, non-investment ) business income. The calculation will depend on income thresholds, what type of business you own, and how you meet certain wage and qualified property tests. But the basic structure is very favorable to you as a small business or independent contractor.
REALTORS® were integral to the favorable interpretation in the proposed rules. The National Association of REALTORS® made a forceful case—both in a detailed letter it sent on June 19 and in a face-to-face meeting with IRS officials in early August—that certain limitations on specified service businesses were not intended by Congress to apply to real estate professionals. And that’s the interpretation the IRS has ended up taking.
As an August 7 Bloomberg News article says, the National Association of REALTORS® “met with OMB (Office of Management and Budget) and Treasury Department officials to discuss proposed rules outlining computation of the new write-off for pass-throughs.”
The new deduction is available for tax years beginning after Dec. 31, 2017. You’ll be able to claim it for the first time on the 2018 federal income tax return you file next year.
Look for detailed NAR guidance by mid-September. It’s a complicated provision and how it works for you will depend on many factors unique to your business structure and your income. As always, consult with your accountant or tax attorney on how this deduction should be applied in your situation.
Dayton Area REALTORS® PAC Government Affairs Committee met and screened several candidates and are proud to announce the endorsement of two county commission candidates: in Montgomery County, the committee elected to support Carolyn Rice in her bid for Montgomery County Commissioner, and in Greene County the committee elected to support Dick Gould in his bid for Greene County Commissioner.
Both candidates sport strong Pro-REALTOR® positions and demonstrated a deep understanding of the value of real estate in our communities.
Legislatively, Beavercreek City Council is considering an impact fee increase. They are looking at increasing impact fees within Traffic System Improvement District 1, which encompasses parcels north of Kemp Rd. and south of Interstate 675. The proposal being considered will increase fees for single-family residential, commercial, and multi-family residential development by 72%, 51%, and 122%, respectively.
The proposal will be moving forward for a second hearing and Dayton REALTORS® will be actively monitoring the motion and coinciding votes. Should you have any questions, comments, or concerns please contact Government Affairs Director Tyler Warner.