“The Tax Cuts and Jobs Act” addressed law that Congress had not tackled since the Tax Reform Act of 1986. It went into effect January 1, 2018.
What, if anything, does this mean for investors?
The tax law made no new restrictions on 1031 exchanges of real property.
However, 1031 exchanges will not be permitted on other types of property that are not real property (personal property, collectibles, aircraft, franchise rights, rental cars, trucks, heavy equipment and machinery, etc).
There were no changes made to the capital gain tax rates.
The depreciation rules for real estate are unchanged. However, property owners will need to take into account the longer depreciation schedules if they elect to use the real estate exception to the interest limit ; longer depreciation schedules can have a negative impact on the return on investment (“ROI”).
The tax law restricts taxpayers from deducting losses incurred in an active trade or business from wage income or portfolio income. This will apply to existing investments and becomes effective 2018.
Because state and local taxes paid in an activity related to the production of income, continue to remain deductible, a rental property owner can deduct property taxes associated with a business asset, such as any type of rental property.