Tax Changes Real Estate Investors Need to Know About


We’re back with one of our favorite people … CPA Tom Wheelwright!
Tom is here to share important updates on current and proposed changes to U.S. tax law as part of the war against COVID-19. 
We’re also discussing the details … and potential repercussions … of proposals currently being floated around during this controversial election year. 
There are changes that real estate investors like YOU need to know about. 
In this episode of The Real Estate Guys™ show, hear from:

  • Your up-to-date host, Robert Helms
  • His taxing co-host, Russell Gray
  • CPA and tax expert, Tom Wheelwright

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Let’s talk about taxes

One of the biggest elements that affects cash flow and overall return of real estate investments is taxation. 
And yet … nobody really likes to talk about it. That needs to change! There’s lots you can do to reduce taxes and make more money. 
Our good friend, CPA Tom Wheelwright, always says, “If you study a nation’s tax code, you can see exactly the behavior they want, because they reward it.”
The tax code is a series of incentives. 
There’s so much going on right now in the world … and in an election year, a lot can happen. 
We don’t have a political argument to make of any kind … but when you start talking about tax policy and you have different parties with different opinions, politics are going to come up. 
We’re here to wrap our minds around some of the proposed tax changes that real estate investors must understand. 

New tax changes you should know about

Going all the way back to Obamacare, there was a tax impact for real estate. Then, the Trump administration came in and made the first major overhaul. 
It’s no secret that with a real estate guy in the White House … we got some very favorable breaks for real estate investors. 
Then, the COVID-19 crisis impacted the tax code. 
Basically, since 2008, the tax code has been a roller coaster. There have been extreme changes in public policy, public behavior, and financial markets. 
All of that means that as a real estate investor, you’ve got to be looking a little bit farther down the road. And, you need to be well-advised by a great tax professional. 
Tom Wheelwright is here to get that conversation started … but remember to sit down with your own tax advisor and get their expert views for your personal situation. 
There have been some really important changes recently for real estate investors. The most obvious one was the qualified improvement property change. 
This was in the Cares Act correcting a mistake in a 2017 act in which the government didn’t include leasehold improvements on commercial property as qualifying for bonus depreciation. 
The Cares Act now said that they do … and you can take advantage of that retroactively all the way back to 2018. You can amend your return, and there can be a lot of money in that. 
The Cares Act also said that if you had to reduce your hours … either business hours or working hours … because of the pandemic, you can pull out up to $100K from all your accounts put together. 
Then, you have two choices. You can either pay tax on that money over three years or you can put that money back in three years and not be taxed at all. 
“You could literally take money out, buy a property, take care of the property, sell the property, and put the money back. Or, you could keep the property and borrow against the property and put the money back,” Tom says. 
Tom adds that anybody who is a real estate investor and seriously doesn’t want their money tied up in their IRA or their 401K should really look into this and see if they qualify. 
The other big change involved the net operating loss carryback. 
In 2017, real estate investors lost the ability to carry back net operating losses. In 2020, we gain that ability … and we gain it for 2018, 2019, and 2020. 
And, now it’s a five-year carryback. We’re talking about going back to 2013, 2014, 2015 … years that were really good years for a lot of people. 
And let’s say you weren’t a real estate professional in those years and now you are … you’ve got bonus depreciation. You can carry back to when you weren’t a real estate professional to offset your income and get a refund. 
Tom says that this particular benefit isn’t popular in the House of Representatives … so you better look into it quickly if you’re interested. 
The other tax benefit that people don’t often talk about is the charitable deduction tax benefit. 
Typically, individuals can only deduct up to 60% of charitable contributions … in 2020, it’s a hundred percent. 
“If you want to give all your money away this year, the government says to go for it. They’ll give you a deduction for it,” Tom says. 

Tax changes that could be coming

The tax changes that real estate investors got under the Trump administration were favorable to a lot of folks. 
Now, with an election year, Joe Biden has come out with his own tax plan and ideas. 
“Biden’s tax plan is basically a tax everything tax plan,” Tom says. “Really, he would eviscerate the tax law if he had his choice, which leads me to personally wonder if he understands the tax law at all.” 
Tom says that, for example, all the real estate benefits would go away. It wouldn’t eliminate cost segregation, but it would eliminate bonus depreciation. 
Biden has also proposed eliminating 1031 exchanges, the basis step up when you die, and oil and gas tax benefits. 
But remember, President Obama also proposed eliminating a lot of these tax breaks. Just because they are proposed doesn’t mean they’ll get enacted. 
Either way, it’s important for real estate investors to be vigilant and stay tuned in. 
For more on tax changes and how they can affect you … listen in to the full episode!


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