by Jack
Hopefully I’ve found the latest, best, information on the new GOP tax bill. However, if there are any additions or corrections, please feel free to send them to me. Well, here goes: The nonpartisan Tax Policy Center estimates the biggest benefit of the new law will go to households making $308,000 to $733,000. Households making over that should get a tax cut worth 3.4 percent of their after-tax income. For the richest 0.1 percent (making over $3.4 million), the tax cut should be worth 2.7 percent of their after-tax income. For middle-income earners: 1.6 percent, the center estimates.
Your rental income may be subject to an additional 15.3% tax. You must meet the following guidelines to be subject to the tax:
Qualify as a real estate professional – Materially participate in your rental activities
– Invest in short-term rentals.
Mortgage interest on new loans is now deductible only on the first $500,000
Real estate property taxes are now capped at $10,000 on Schedule A. So if you own a home of exceedingly high value, you may lose a little on this change.
The elimination of state and local income taxes as itemized deductions will be costly for those in high-tax states, like CA and New York. It’s quite possible this was a deliberate attempt to punish CA for its outrageous sanctuary state status that defies federal law and promotes illegal immigration. However, you will never hear anyone in the GOP admit to it, personally I am glad they did because CA ought to be punished. We’re a nation of laws and federal law takes precedent over state laws, we had a civil war to make that clear, right? CA is absolutely wrong to challenge the federal government over immigration. But, our legislature is now heavily influenced by a massive Hispanic voter block that has stacked Sacramento with race based La Raza type politicians who have a very narrow agenda…to promote Hispanics. All others take a back seat. Race should not play any role in politics, we should be color blind. Either it’s right or wrong for ALL the people, that should be our only consideration.
The Alternative Minimum Tax (AMT) was proposed to be eliminated with this bill. The AMT is an attempt by congress to make sure that rich Americans pay at least a 28% tax on all of their income. The problem is that the AMT negatively impacts the middle class, probably more so than it does the rich.
The corporate tax rate could drop from 35 percent down to 20 percent. However, some LLCs and S corporations will be allowed a 25% tax rate on their pass-through income. The calculation on the 25% pass-through rate is complicated, and businesses such as service businesses have been specifically excluded from qualifying for a 25% rate.
They settled on 21% for the Corporate tax rate.
Varney reported this morning on six corporations that have already announced planned bonuses, pay increases, and new jobs. Gateway Pundit has links to four: ATT, Boeing, Bancorp, and Comcast. I haven’t found other news outlets that bothered to share this good news…as usual.
The Washington Examiner lists 81 major accomplishments for Trump this year (so far…he does have ten days left).
Off topic, but even Libs should be upset at this:
https://www.washingtontimes.com/news/2017/dec/21/barack-obama-used-classified-intelligence-leaks-po/
When goofernment is outta control, NOBODY is safe!
“Your rental income may be subject to an additional 15.3% tax. You must meet the following guidelines to be subject to the tax:
Qualify as a real estate professional – Materially participate in your rental activities
– Invest in short-term rentals.”
This is one very murky part of the existing definitions of a professional real estate investor and now due to the new TCJA (Tax Cut Jobs Act) it needs to be clearly defined as to what a “professional” is.
One of the definitions of a”Real Estate Professional” is “are you in it for profit” (paraphrased), Well most lay people are.
Is profit your intention or are you just looking for a depreciable write off that will provide equity growth to eventually off set or breakeven on your real estate dollars investment.
When they clean up the purpose and definition of what constitutes your intentions , then we can answer the question of the unknown factor around 15.3% (FICA tax substitute in my opinion) to be assignment to investment property.
The current TCJA verbiage reads, “the rules limit the QBI(Qualified Business income) deduction to the lesser of 20% of its business income or 50% of the total wages paid by the business to its employees. Thus, a high-income business that has very few employees (e.g., a firm making $5M of revenue and $3M of profits that pays only $1M to a handful of employees) might have its deduction limited to only 50% of its payroll (in this case, a $500k deduction for 50% of payroll, instead of a $600k deduction for 20% of its profits). For capital-intensive businesses with very few employees (e.g., real estate investors, factory/machinery-intensive businesses), a last-minute addition to the final legislation (which was not included in either the original House or Senate versions) gives an alternative wage limit, which is 25% of W-2 wages plus 2.5% of the unadjusted basis of depreciable property (e.g., equipment and machinery, or even real estate). Notably, though, these wage limits to the QBI deduction apply only if the taxpayer’s own taxable income (not AGI, but taxable income after deductions) exceeds a threshold of $157,500 for individuals or $315,000 for married couples (which is down from $250,000 and $500,000, respectively, in the original Senate version, and now aligns to the top of the new 24% tax brackets).”
So far this is all I could uncover about the mentioned 15.3% tax on rental income (ALL?), and how that will work, not to mention how it will affect those eligible for receiving retirement SS benefits and earning rental income on long term tenants and property holdings, I am still looking for more info on. that question.
If it does affect the average Mom and Pop, who have long term rental property, and they get taxed that additional 15.3% you might expect a pass thru in rent increases to cover this tax, as it will be on top of the personial income tax they already pay on rental income.
As I find and clearly figure it out, I will post it…and anyone out there with information, please post it as well.
Surprisingly, CBS posted a positive video of how the new tax law would effect three families from different states, one being California.
How three different households will fare under the tax bill: video
https://www.cbsnews.com/news/how-the-tax-bill-will-affect-three-american-families/