Tax Reform [4 of 5] Real Estate Related Changes

By January 29, 2018 Taxes

We are giving you a short one today because next post on the changes to your personal taxes is a little long because….well, the IRS made a lot of changes to the personal tax code.

For this one, if you have real estate as a rental property (residential or commercial) or do real estate investing, these changes may affect you.

Depreciation Definition 

Before, if you made improvements to your rental property or your place of business, you had to figure out if the improvements were 15 year or 20 year property.

If they were qualified leasehold improvements, or qualified retail improvements, or qualified restaurant property, or qualified improvement property.

Now, all improvements are 15 year qualified improvement property.  And don’t forget, you can take 100% of these types of costs as a tax deduction until the end of 2022.

The benefit of this change is purely simplicity. No more guess work on what to call your improvement expenses.

Like Kind Exchanges (1031)

Before, you could offset the gain of selling an asset by taking that gain and putting it toward the purchase of a new asset that is very similar to the one you just sold.

After, this ability to not claim a gain now only applies to real estate rentals.

This is a big kick to the groin of the real estate investors that “flip” properties.  But for most everyone else, they won’t notice any difference since they weren’t using this strategy before.

Again, next post will go over the changes to personal tax returns.

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