With a record number of unemployed and the moratorium on evictions during the COVID crisis, it can feel like being a rental property owner is a horrible investment. While COVID has certainly hurt many landlords’ bottom lines, it is still a good investment. Thanks to the Tax Cuts and Jobs Act (“TCJA”), it is easier than ever to realize profit as a landlord. This article will briefly discuss some of the benefits the TCJA has given to landlords.
During your first year as the owner of a rental property, you can take a special depreciation bonus up to 100% of the property’s value; typically, you can only deduct up to 50% of the property’s value on your depreciation deduction (since this deduction is applied to your rental income, it could result in you paying zero taxes for income from your rental property in the 1st year).
Of course, this perk isn’t given to every rental property. In order to qualify the property must: (1) be available for tent between September 27, 2017 and January 1, 2023; and (2) at least some of the property must have a “class life” smaller than 20 years (most properties have a 27.5-year class life, but a CPA can help reclassify it).
Moreover, TCJA appears to allow landlords to treat up to 20% of their rental income as tax-free! Section 199A of the IRS Code has received clarification, and it is clear that it provides protection to landlords and their rental income.
At the Chernov Team we understand that knowledge is power, and knowledge of how major laws impact the viability of rental properties is powerful knowledge indeed. At the Chernov Team we know that whoever comes to the table most prepared leaves with the most, and the Chernov Team always leaves the table with the most.