What Has Changed With Investment Real Estate?
Are you thinking about entering the investment real estate market? Or perhaps you already have rental properties that are bringing in a passive income for you? Regardless of whether you own the real estate as an individual or via a pass-through entity like a partnership, LLC or S corporation, your net income from those properties is taxable at your personal federal income tax rates.
Here’s the 2018 ordinary income rates & brackets under the Tax Cuts and Jobs Act (TCJA).
| Rate | Individuals | Married Filing Jointly | Head of Household |
| 10% | Up to $9,525 | Up to $19,050 | Up to $13,600 |
| 12% | $9,526 to $38,700 | $19,051 to $77,400 | $13,601 |
| 22% | 38,701 to $82,500 | $77,401 to $165,000 | $51,801 |
| 24% | $82,501 to $157,500 | $165,001 to $315,000 | $82,501 |
| 32% | $157,501 to $200,000 | $315,001 to $400,000 | $157,501 |
| 35% | $200,001 to $500,000 | $400,001 to $600,000 | $200,001 |
| 37% | $500,001 | $600,001 | $500,001 |
Investment Real Estate Write-offs Are Same.
There are new limitations on deducting personal residence mortgage interest. However, those limitations do not apply to rental properties. Check with us regarding how personal use can adversely affect your deductions. Investment real estate write-offs are still the same. You can still deduct operating expenses for rental properties like depreciation, utilities, insurance, repairs, maintenance, yard care, and association fees.
Like-Kind Exchanges Are Still Allowed For Real Estate.
What if you’re thinking of selling one property to buy a newer property? Good news still for investors. The new TCJA law still allows investment real estate owners to upgrade their real estate properties without taking a federal income tax hit. Under Section 1031 exchange, you can trade your old properties for newer ones and defer taxes on the gains. The only time you will be required to pay taxes will be when you sell your final investment property. Just remember this rule under Section 1031 does not apply to personal property.
If you are planning to purchase investment real estate or you are currently holding investment real estate, allow us to help you get the most in your tax deductions. Paragon Accounting & Tax Solutions specializes in accounting, tax and payroll services for small and medium-size businesses in the Woodstock GA and surrounding areas. Contact us today and see the difference our CPA office can do for you!