The 2018 Federal Income Tax Bill has many changes to the currently existing tax plan. This video will cover the the top five highlights of the federal income tax bill in relation to commercial real estate investors and real estate owners. Please watch the video above. We hope you find it insightful and informative to your commercial real estate needs.
Five Highlights of the 2018 Federal Income Tax Bill
1. Top Individual Rate
The new tax bill includes a major overhaul causing significant changes to the federal tax brackets and deductions, which will be reflected in 2019 returns. Also known as marginal tax rates, tax brackets tell you the tax rate you pay on each dollar of your reported income over a certain threshold. The top individual rate has come down, falling from 39.6 percent to 37 percent. This rate will hit taxpayers with taxable income of $500,000 and higher for single filers, and $600,000 and higher for married couples filing jointly.
2. Like-Kind Exchanges
For our audience, its important to note that there have been no changes made to 1031 real estate exchanges. The portion of the tax code that allows tax-free exchanges of like-kind property and the deferral of capital gains remains intact in the 2018 tax bill.
3. Corporate Rate
As of January 1st, the corporate rate has been permanently slashed from 35 percent to 21 percent.
4. Estate Tax
Running through 2025, the new tax bill more than doubles the exemption amount for the estate, gift, and generation-skipping taxes from $5 million to $11 million.
5. State and Local Tax Deduction
Under the new bill itemized deductions for state, local and property taxes are now capped at $10,000. Prior to this bill, the deduction was unlimited. However, it is important to note that this does not effect commercial real estate property tax.