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For many commercial real estate owners, the real estate bubble of 2008 was far in the rearview mirror as they rang in the 2020 New Year.

Nearly 12 years later, they survived the drop in property valuations, frozen lines of credit, mortgage defaults and renegotiations, which the credit markets had served up in 2008. Little did they know, the arrival of the COVID-19 pandemic in the U.S. would usher in a far greater challenge than they ever experienced.

Q: What Does ‘Like-Kind’ Mean in a 1031 Exchange?

A: As you are probably aware, a 1031 Exchange refers to a provision in the U.S. tax code, which allows real estate investors to sell or dispose of a piece of real property and purchase another piece of “like-kind” property without incurring any short-term tax consequences. But what does like-kind mean?

One nearly universal element of the American Dream is the desire for your children to have more and do better than you. Many parents consider the legacy they will leave for their children as a part of their financial goal.

 

Ask the Expert: I sold my income property. Someone told me I could be impacted by depreciation recapture even though I didn’t claim depreciation – is this true?The short answer is, yes.

Certain types of assets can be depreciated and are subject to depreciation recapture; among these are investment rental properties.

You’ve decided that it’s time to try your hand at real estate investing. You’ve read about the potential tax savings and you want to give it a try…great! But before you jump in, there are a few important things you should think about to ensure you’re protecting your personal assets and optimizing your tax position.

 

If you’re like most, you want to be able to leave something to your progeny when you die. Leaving a legacy for our children is just part of the American dream of wanting them to “have it better” than we did. But many well-intended parents have had their wishes left unfulfilled because of simple errors in estate planning.

The IRS recently provided guidance to real estate investors regarding the Qualified Business Income (QBI) deduction under the Tax Cuts and Jobs Act (TCJA.) One of the weaknesses of the QBI provision of the TCJA was a lack of clarity in section 199A, which allows some taxpayers with pass-through businesses (e.g. LLCs and S-Corps,) to deduct 20% of their qualifying income.

Investing in real estate is a great way to develop wealth and improve your cash flow. In addition to the benefits of receiving monthly rental income, you can also potentially realize some significant tax benefits.

The Tax Cuts and Jobs Act of 2017 affected the tax deduction for interest paid on home equity debt as of 2018.

Under prior law, you could deduct interest on up to $100,000 of home equity debt, no matter how you used the money. The old rule is scheduled to return in 2026.

The bad news is that you now cannot deduct interest on home equity loans or home equity lines of credit if you use the money for college bills, medical expenses, paying down credit card debt, etc.

The good news is that the IRS has announced “Interest on Home Equity Loans Often Still Deductible Under New Law.”

As most individuals who invest in real estate know – or quickly learn when they file their income tax returns – they become subject to a complex set of rules known as the Passive Activity Loss (PAL) rules.

In a nutshell, the rules state the following: