Real Estate Alert: Tax Bill Creates New Deduction on Qualifying Pass-Through Income

By William H. Jennings  |  December 20, 2017

The Tax Cuts and Jobs Act (H.R. 1) was passed by Congress today and sent to the President to be signed into law. The final reconciled bill creates a new deduction for qualifying pass-through income, subject to certain limitations. Generally, any trade or business is eligible for the deduction, except specified service businesses.

A last-minute revision from the joint conference committee clarified how to calculate the income limitations on this deduction. The deduction is limited by the LESSER of A) 20% of qualified business income or B) the GREATER of 50% of W2 wages paid by the business OR the sum of 25% of W2 wages plus 2.5% of the unadjusted basis, immediately after acquisition (NOT fair market value), of all tangible depreciable property of the business.

For purposes of this calculation, tangible depreciable property must be held by, available for use, and still currently depreciable in the qualified trade or business at the close of the taxable year. These wage/capital restrictions as well as the restrictions relating to service businesses do not apply to taxpayers below certain thresholds.

For more information on your eligibility for this deduction or to learn more about our Real Estate services, please contact your Marks Paneth Real Estate advisor or William Jennings, Partner-in-Charge of our Real Estate Group, at wjennings@markspaneth.com.


About William H. Jennings

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William H. Jennings, CPA, is a Partner in the Real Estate Group at Marks Paneth LLP. Mr. Jennings served on the Marks Paneth Executive Committee, which sets policy and strategy for the firm, from its inception until 2019. He is Past Partner-in-Charge of the Real Estate Group and Past Partner-in-Charge of the firm’s Boca Raton, Florida office. With more than 35 years of experience in public accounting and a keen focus on the real estate... READ MORE +


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