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Tax Cuts and Jobs Act: Benefits for Real Estate Investors and Land Lords

Owning an investment property may have just became much more attractive.


The Tax Cuts and Jobs act clearly reduces the incentives for homeowners, with the standard deduction doubled, MID limited and SALT capped at $10,000. Congressional estimates that only 5 – 8% of filers will now be eligible to itemize (34% of filers in CA use SALT deduction) and for 90% of taxpayers, there will be no tax differential between renting and owning. However, a reduction in incentives for homeownership results in strong demand in the rental market. This fact, and a new deduction on taxable income of pass-through companies suggests that landlords and other real estate investors stand to benefit from the new law.


Real Estate investors and landlords can now take advantage of a new break that provides a 20 percent deduction on taxable income for pass-through companies. Business income that passes through to an individual from a pass-through entity and income attributable to a sole proprietorship will be taxed at individual tax rates less a deduction of up to 20%. Read more about the new tax structure, restrictions, and limitations for pass-through companies here.


For those who do not know, pass-through businesses are those that pay their taxes through the individual income tax code rather than through the corporate code. These sole proprietorships, S corporations, and partnerships make up the vast majority of businesses and more than 60 percent of net business income in America. Additionally, limited liability companies (LLCs) can elect to be taxed as partnerships, which are now used to organize a substantial share of finance, real estate, and investment management activities.


Read more on this topic here.

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