Rental Properties – Are they eligible for 199A (20%) Deduction?
As Congress and the IRS continue to more clearly define the New Tax Act we will attempt to keep you informed. Recently they defined the rules around rental properties.
For 2018 and beyond, rental property owners (Individuals, Partnerships, Trusts and S Corporations) can qualify for the 199A deduction if certain qualifications are met:
• Must maintain separate books and records
• 250 hours or more of rental services per year
• Must maintain time records for rental services (only for 2019 and future years)
• Suggested that 1099 forms be filed to service providers
Rental services are defined as: (i) advertising to rent or lease the real estate; (ii) negotiating and executing leases; (iii) verifying information contained in prospective tenant applications; (iv) collection of rent; (v) daily operation, maintenance, and repair of the property; (vi) management of the real estate; (vii) purchase of materials; and (viii) supervision of employees and independent contractors. The term rental services does not include most financial or investment management activities.
There is a required IRS safe harbor agreement that requires a signature by the taxpayer and attachment to the e-filed tax return beginning with the 2018 tax year.
There are more details to this new section 199A of the tax code, so please consult with a tax professional at ATLAS CPAs & Advisors PLLC for more specifics.
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