Presario Ventures recently hosted a sold-out event as part of our ongoing educational series. Our guest speaker Todd Pittenger discussed tax reform and how it will impact income from commercial to multi-family real estate investments, something most people are eager to know more about.
Pittenger is a CPA familiar with real estate investment, development, and management. As a tax advisor for myriad real estate projects, he provided real-life intelligence and perspective on how tax reform will impact real estate investing, ownership, and management.
Pittenger explained that while tax brackets have changed, the biggest change is the 20% pass through deduction found in section 199A. This is a new income deduction.
“Simply put, this is the section that defines the criteria for qualifying for the 20% deduction and how to calculate the deduction,” Pittenger said.
Business entities eligible for the Section 199A deduction include real estate investment trusts, trusts and estates with an interest in a pass-through entity, sole proprietorships, and Schedule E real estate investors, among others.
Pittenger discussed some of the guidelines for the deduction, new tax reform, including what type of income it applies to, and who can take it.
The upshot of this new code, he said, is that unless you are in the group listed as “specified service trades or businesses” – that includes healthcare, law, accounting, performing arts, financial services, and athletics – you can benefit from the new deduction. Some of those listed groups may still participate up to a certain phase out level.
Pittenger demonstrated some specific examples of how individuals can apply the deduction to income from a real estate investment. He showed the audience examples for individuals both within the phase out limits and those outside of those limits.
The bottom line is that with this new deduction, investors can potentially gain a lot more from real estate income. It will be important, as always, to work with knowledgable industry leaders in order to maximize returns.
We were pleased to host a knowledgeable speaker who could guide us and educate us on how the new tax law might impact the income from real estate investments. When there are large-scale changes in the tax code, it is prudent to determine the effect on your portfolio as early as possible. We believe the evening was invaluable to us and our investors.