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How the New Tax Law Affects Your Real Estate Business

May 25, 2018

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The Tax Cuts and Jobs Act (TCJA) brings big tax changes to the real estate sector, the likes of which haven’t been seen since the Tax Reform Act of 1986.

Fortunately, the impact on real estate businesses should be mostly positive. That said, there are some crucial changes that business owners and entrepreneurs in the real estate sector should look out for moving forward.

Pass-through entities

You have probably heard about the 40 percent reduction in the corporate tax rate to 21 percent under the TCJA. However, if you operate as a sole proprietor, or in a pass-through entity such as a partnership, LLC or S Corporation, the TCJA also contains a significant change to how you will be taxed.

A deduction of up to 20 percent of qualified business income is now permitted. This deduction is limited to the lesser of:

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