TAX REFORM
Tax Reform And You (and your 2018 filing)
Thanks to NAR advocacy efforts, the Tax Cuts and Jobs Act
contains several favorable provisions for individual real estate professionals
MAJOR PROVISIONS AFFECTING
REAL ESTATE PROFESSIONALS
DEDUCTION FOR QUALIFIED BUSINESS
INCOME
Because the new tax law greatly decreases
the tax rate for corporations (from the prior law’s
35 percent to just 21 percent), many members
of Congress believed that the business income
earned by sole proprietors, such as independent
contractors, as well as by pass-through businesses,
such as partnerships, limited liability
companies (LLCs), and S corporations, should
also receive tax rate reductions. In addition to
lower marginal tax rates, the final law provides
a significant up-front deduction of 20 percent
for business income earned by many of these
businesses, but with certain conditions.
Specifically, the law limits the 20 percent
deduction to non-personal service businesses.
Essentially, a personal service business is one
involving the performance of services in the
following fields:
Health, law, consulting, athletics, financial
services, brokerage services (not real estate),
and “any business where the main asset of the
"Whew."
That’s the general REALTOR® response to the tax reform law,
which while diminishes the tax benefits of homeownership and
will cause adverse impacts in some markets, could have been a
whole lot worse.
Advocacy efforts by NAR as well as consumers resulted REALTOR®-favored
elements to the Tax Cuts and Jobs Act, such as the exclusion for capital
gains on the sale of a home; the preservation of the like-kind exchange
for real property; and the omission of early language that would have
subjected independent contractors to an additional 5 percent withholding
requirement. In addition, many agents and brokers who earn income as
independent contractors or from pass-through businesses will see a significant
deduction on that business income.
Read on for details about the impact of the Tax Cuts and Jobs Act on you
as a real estate professional (giving you plenty of time to prepare for filing
your 2018 taxes). Please visit orlandorealtors.org for information about the
impact of tax reform on current and potential homeowners, and the resulting
implications for the housing market and the real estate industry.
14 Orlando REALTOR® May / June 2018
/orlandorealtors.org