On December 20th, 2017 one of the largest tax reforms bill in recent decades was passed, which went into effect on December 31, 2017. The implications of this Act will affect realtors, homeowners, future homebuyers and the real estate market.
As a Realtor
Pass-Through Businesses. Many realty businesses are self-operating and may be classified as pass-through businesses, in which case the owners report their business incomes directly on their personal income tax returns. For these types of business entities, the realtor would benefit from a temporary deduction of 20% on the income tax rate.
Income Deduction. Additionally, the income deduction benefits are especially helpful for real estate businesses that have a low payroll and large capital investments. Learn more about how pass-through entities are impacted here
For Your Clients
Temporary Deduction Increase. The majority of both individuals and married tax filers will have a temporary increased standard deduction, which will expire after 2025.
Lower Individual Income Taxes. Wider brackets, reduced rates, and increased standard deductions will all contribute to ultimately lower individual income taxes with fewer itemized deductions.
Capital Gains Exclusion Remains. Although there was a discussion for change by both the House of Representatives and Senate, ultimately the current capital gains rate and net investment income tax remain unchanged.
Temporary Decrease in Mortgage Interest Deduction. Under prior law, the home mortgage interest deduction was $1 million, however, now this deduction has been lowered to $750,000. Pre-existing loans of up to $1 million limit are grandfathered in with the higher deduction rate.
For a more precise analysis of how the new tax law affects you and your business, please consult a tax advisor.