IRS Has Good News for Real Estate Brokers
IRS Has Good News for Real Estate Brokers
If you’re a real estate broker then you might be in for some very good news from the IRS. Yes, it’s rare that the IRS has good news for anyone. However, in this case, the news really is good, as long as you meet the requirements. The announcement by the IRS is related to the 20 percent pass-through deduction included in the new Tax Cut and Jobs Act (TCJA). Who Qualifies? Since the law went into affect, there had been much confusion as to weather or not real estate brokers and agents could claim the deduction. Now the IRS has cleared things up. According to the agency’s proposed rules, the services provided by “real estate agents and brokers, or insurance agents and brokers” are not excluded. But there is still a caveat. These rules are still just a proposal. There will be a hearing on October 16 to discuss the proposal.
More Clarification Needed
The confusion started when the law originally went into effect because it barred anyone who provided “brokerage services” from receiving the tax cut. The problem was the definition of “brokerage” was very vague. The proposal from the IRS helps to clear things up, but there are still some stipulations that need more clarification.
For example, will the deduction apply to certain landlords that collect rent under triple net leases? Additionally, how will the deduction work for those that make more than the $157,500 (or $315,000 filing jointly)? These are questions that still need to be addressed. That’s why it’s important to consult with a tax advisor if you fall into this category.
Significant Tax Savings
If you make less than the threshold amounts then you automatically qualify for the 20 percent deduction. So, in other words, if you made $140,000 in self-employment income you would automatically get a $28,000 deduction. Therefore. You would only be taxed on $112,000. That’s a big savings and a big win for real estate brokers and agents.
On the other hand, if you make more than the threshold amounts then you might not receive the full 20 percent deduction. The formula is based on Q-2 wages. Therefore, because many brokers and agents file their taxes through a Form 1099 as independent contractors, instead of a W-2, they would most likely not get the entire deduction. But they would still qualify for a part of it.
What About Real Estate Owners?
As for real estate owners, or landlords, the proposal is still not completely clear. Will they be eligible to claim the 20 percent deduction or not? It all depends on whether or not they meet the definition of an active “trade or business.” And that still needs to be determined.
Wait and See
So for now, if these proposals pass, then real estate agents and brokers are the big winners. On the other hand, real estate owners and landlords will have to wait and see if they too get a piece of the pie.
We hope you found this article about “IRS Has Good News for Real Estate Brokers” helpful. If you have questions or need expert tax or family office advice that’s refreshingly objective (we never sell investments), please contact us or visit our Family office page or our website at www.GROCO.com. Unfortunately, we no longer give advice to other tax professionals gratis.
To receive our free newsletter, contact us here.
Subscribe to our YouTube Channel for more updates.
Alan Olsen, is the Host of the American Dreams Show and the Managing Partner of GROCO.com. GROCO is a premier family office and tax advisory firm located in the San Francisco Bay area serving clients all over the world.
Alan L. Olsen, CPA, Wikipedia Bio
GROCO.com is a proud sponsor of The American Dreams Show.
The American Dreams show was the brainchild of Alan Olsen, CPA, MBA. It was originally created to fill a specific need; often inexperienced entrepreneurs lacked basic information about raising capital and how to successfully start a business.
Alan sincerely wanted to respond to the many requests from aspiring entrepreneurs asking for the information and introductions they needed. But he had to find a way to help in which his venture capital clients and friends would not mind.
The American Dreams show became the solution, first as a radio show and now with YouTube videos as well. Always respectful of interview guest’s time, he’s able to give access to individuals information and inspiration previously inaccessible to the first-time entrepreneurs who need it most.
They can listen to venture capitalists and successful business people explain first-hand, how they got to where they are, how to start a company, how to overcome challenges, how they see the future evolving, opportunities, work-life balance and so much more..
American Dreams discusses many topics from some of the world’s most successful individuals about their secrets to life’s success. Topics from guest have included:
Creating purpose in life / Building a foundation for their life / Solving problems / Finding fulfillment through philanthropy and service / Becoming self-reliant / Enhancing effective leadership / Balancing family and work…
MyPaths.com (Also sponsored by GROCO) provides free access to content and world-class entrepreneurs, influencers and thought leaders’ personal success stories. To help you find your path in life to true, sustainable success & happiness. It’s mission statement:
In an increasingly complex and difficult world, we hope to help you find your personal path in life and build a strong foundation by learning how others found success and happiness. True and sustainable success and happiness are different for each one of us but possible, often despite significant challenges.
Our mission at MyPaths.com is to provide resources and firsthand accounts of how others found their paths in life, so you can do the same.
Small Business Stocks Can Lead to Big Gains
What’s your investment strategy? There is no end to the number of different strategies that investors have, and there are plenty of different successful ways to invest in the stock market. Likewise, Wall Street is full of stories of investors that have ended up on the side of the road, kicked to the curb after…
Four Things to Consider Now for the Upcoming Tax Season
It’s November already. How can that be possible? The more important question is what are you going to do about it? Although it seems like the last tax season just ended a few months ago, the next tax season is just a few weeks away. That means you should already be preparing for your inevitable…
Soccer Star Will Have to Go to Trial for Alleged Tax Evasion
The ongoing tax saga of soccer star Lionel Messi will continue. That news comes after a judge in Spain ruled that the Barcelona FC star would indeed have to stand trial for tax fraud charges in association with his many endorsement deals with foreign companies. The news comes just days after a report stated that…
Common Trust Fund Questions for Beginners
Are you considering a trust fund? Trust funds are a very useful tool for saving and investing money, but a lot of people aren’t totally sure how to use a trust or even how they work. Trust funds essentially hold assets, like property, a business or money, for the benefit of another person, a group…