Latest news with #Section199A
CNBC
6 days ago
- Business
- CNBC
House Republican budget bill calls for bigger 'pass-through' business tax break. Who could benefit
Senate Republicans will soon debate trillions of tax breaks approved by House lawmakers, including a bigger deduction for small business owners, contractors, freelancers and gig economy workers. Enacted via the Tax Cuts and Jobs Act of 2017, the Section 199A deduction for qualified business income, or QBI, is currently worth up to 20% of eligible revenue, with some limitations. Without action from Congress, the QBI deduction will expire after 2025. But the House Republicans' "One Big Beautiful Bill Act" would make the provision permanent and expand the maximum tax break to 23% starting in 2026. More from Personal Finance:What the House GOP budget bill means for your money'Maycember' is almost over — here's how to recover financiallyCourt order challenges Trump's plan to move student loans to SBA The QBI deduction applies to so-called pass-through businesses, which report profits or losses on individual tax returns. This includes partnerships and S-corporations, along with some trusts and estates. Sole proprietors, such as freelance, contract and gig economy workers, also qualify. For 2025, the tax break starts to phaseout when taxable income reaches $197,300 for single filers and $394,600 for married taxpayers filing jointly. The deduction can be reduced or eliminated completely, depending on your earnings and type of business (more on that below). For tax year 2022, the most recent data available, there were roughly 25.6 million QBI deduction claims, up from 18.7 million in 2018, the first year of the tax break, according to IRS data. However, the deduction has been controversial because "most of the benefits flow to taxpayers with a lot of income," said Erica York, vice president of federal tax policy with the Tax Foundation's Center for Federal Tax Policy. "These are not taxpayers who work a W-2 job and earn a salary," she said. "They're business owners who receive business profits on their individual tax returns." Currently, certain white-collar professionals — doctors, lawyers, accountants, financial advisors and others — known as a "specified service trade or business," or SSTB, can't claim the QBI deduction once income exceeds certain limits. There's also an income phaseout for non-SSTB businesses, but that doesn't go to zero. The House bill would change the phaseout calculation, which could provide a bigger tax break for certain SSTB owners, said certified financial planner and enrolled agent Ben Henry-Moreland, senior financial planning nerd for advisor platform who analyzed the bill last week. If enacted, the higher 23% deduction could offer "some [tax] benefit" for all income levels, but the phaseout changes would primarily benefit higher-income SSTB owners, he said. The House proposed QBI deduction changes would be "more generous and more valuable to higher-income people, especially those in certain industries including lawyers and lobbyists," Chye-Ching Huang, executive director of the Tax Law Center at New York University Law, wrote in early May.
Yahoo
26-05-2025
- Business
- Yahoo
5 tax deductions for rental property
If you're a landlord, your rental property not only brings you extra income but can allow you to write off tax deductions to lower your tax liability. From repairs and maintenance to mortgage interest and more, rental properties come with many expenses. In many cases, you can write off these costs on your tax return. Here are five tax deductions you can claim for your rental property. One of the key aspects of owning rental real estate is that you can deduct certain expenses on your income tax return. 'Typically any expense that you incur to run the property and generate income is considered deductible,' says Atiya Brown, a certified public accountant and owner of the Savvy Accountant in Mansfield, Texas. The IRS allows you to deduct ordinary and necessary expenses for your rental property. Those can include furnace repairs, lawn-mowing services, cleaning expenses between tenants and more. You can also deduct ongoing expenses like homeowners insurance and property taxes. See the IRS' tips for rental property deductions. However, don't confuse maintenance and upkeep with property improvements, which are handled a different way. You can't deduct the full cost of improvements right away, but you can recover the cost over time by using Form 4562 to report depreciation (more on this in the 'property depreciation' section below). 'Only a percentage of these expenses are deductible in the year they are incurred,' the IRS says. See the IRS instructions for Form 4562. Sole proprietors and owners of S corporations, partnerships and some trusts or estates might qualify to claim the qualified business income (QBI) deduction, also known as Section 199A. (See this IRS page for more information.) Learn more: Qualified business income deduction: What it is and how to claim it Passive activities, such as some rental activities, are usually not eligible for the QBI deduction. However, the IRS allows for a safe harbor under which a real estate enterprise is treated as a trade or business for the purpose of the QBI deduction. You can read more about how to qualify in this IRS document. Depending on how you run your rental property as a business, you might qualify for this deduction. Eligible taxpayers might be able to deduct up to 20 percent of their qualified business income, as well as 20 percent of qualified real estate investment trust dividends and qualified publicly traded partnership income. Keep in mind that the QBI deduction was introduced as part of the 2017 Tax Cuts and Jobs Act (TCJA). The QBI deduction and other provisions of the TCJA are due to expire on Dec. 31 unless Congress takes steps to extend them. The House of Representatives in May passed a proposed tax bill that would maintain the QBI and raise its value to 23 percent, from the current 20 percent. Learn more: Trump's tax plans: The 'big, beautiful' tax bill heads to the Senate Need an advisor? Need expert guidance when it comes to managing your investments? Bankrate's AdvisorMatch can connect you to a CFP® professional to help you achieve your financial goals. Depreciation allows owners to write off part of the loss in value of the property's structures due to wear and tear over time. In accounting, the process is typically referred to as capitalization. 'You can claim a percentage each year until the asset is sold or fully depreciated,' Brown says. Generally, you can start depreciating your rental property when it's available for rent, which means the property is suitable for occupancy, even if vacant. Typically, the improvements you make to your property can be treated as separate property for the purposes of depreciation. For example, a deck or bedroom addition can be depreciated separately from the rental property itself. The depreciation amount depends on a few different variables, including what type of item it is. For example, residential property is typically deducted over 27 ½ years, whereas appliances such as a stove or refrigerator are depreciated over five years. An important aspect of depreciation to keep in mind is something known as 'depreciation recapture.' If you sell your property for a gain, some of the gain may be taxed as income if you took depreciation deductions. You may also be able to find tax deductions related to running a business. For instance, if you have a home office, you might be able to deduct a certain amount related to using your home for business purposes. However, the home office must be regularly and exclusively used for business and be your principal place of business, according to the IRS. Learn more: The home office deduction: Who qualifies and how to calculate it Another area where you might find deductible expenses is if you have employees or contractors. If you employ a property manager or you contract people to fix up the property, for instance, wages paid may be deductible. (Check out this IRS page.) You may also be able to deduct any legal or other professional fees you incur. For instance, if you have to pay a legal fee as part of setting up an organizational partnership, that could qualify as a business expense. You might also be able to deduct fees paid to accountants, bookkeepers and tax preparers as part of the direct and necessary operation of the business. Learn more: 5 tips to find the best tax preparer for you Rental property tax deductions allow you to claim the cost of repairs, maintenance, taxes, insurance, depreciation and any other expenses associated with the property. But generally, if these deductible expenses exceed your rental income, you can only deduct up to $25,000 in losses in a given year, and only if you're below the income threshold. Here's the income limit on claiming these losses: If your modified adjusted gross income is $100,000 or less, you may be able to claim rental losses of up to $25,000. If your MAGI exceeds $150,000, you're not eligible to deduct rental losses. If a taxpayer incurs a loss over $25,000, the amount that exceeds the threshold is 'suspended until the property is sold or passive income is generated,' says Alton Bell, an enrolled agent and founder of Bell Tax Services in Chicago. In other words, you can carry the loss forward to deduct in future years. Bell recommends consulting a tax planner throughout the year to figure out income reduction strategies if you are subject to loss limitations. In addition, Bell recommends checking to see if you meet the IRS requirements for real estate professionals. If you do qualify as a real estate professional, you don't face the $25,000 limit on rental losses. To qualify, you must do more than half of your work in real estate-related activities, such as property management. As a second requirement, you need to work 750 hours or more in those activities every year and materially participate in them. Bell also says timing plays a vital role in lowering your tax bill. 'If you have a potential gain from a sale of another rental property, you can sell within the same year so that your losses can offset the gains,' he says. Current tax brackets What happens if you don't file taxes? Find and compare investment property mortgage rates
Yahoo
22-05-2025
- Business
- Yahoo
ALTA Applauds House Passage of Tax Package
WASHINGTON, May 22, 2025 /PRNewswire/ -- American Land Title Association (ALTA) CEO Diane Tomb issued the following statement regarding the U.S. House of Representatives' passage of the One Big Beautiful Bill tax legislation. "We commend the House for passing legislation that recognizes the needs of American small businesses, including the thousands of title and settlement companies ALTA represents. The expanded deduction under Section 199A is a welcome step that supports the long-term health of our small business members and the communities they serve. ALTA is especially pleased to see the preservation of Section 1031 like-kind exchanges, which play a vital role in fueling real estate investment, promoting property improvements and driving local economic growth. Provisions supporting homeownership, including those related to mortgage interest and capital gains exclusions, help provide certainty for buyers, sellers and lenders alike—strengthening the entire housing ecosystem. We urge the Senate to build on this momentum and protect the real estate and housing incentives that help Americans build wealth, promote generational stability and drive our economy forward." About ALTAThe American Land Title Association, founded in 1907, is the national trade association representing more than 6,000 title insurance companies, title and settlement agents, independent abstracters, title searchers and real estate attorneys. Contact: Megan Hernandez Direct Office Line: 202-261-0315 Email: mhernandez@ View original content to download multimedia: SOURCE American Land Title Association Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
10-03-2025
- Business
- Yahoo
Trump's tax cuts could expire by year's end. Which ones are they?
(NewsNation) — The Tax Cuts and Jobs Act could expire at the end of 2025 if lawmakers don't extend the legislation, and a majority of taxpayers could pay the price. 'Without congressional action, 62 percent of filers could soon face a tax increase relative to current policy in 2026,' according to the Tax Foundation, a nonpartisan tax policy nonprofit. 'At the same time, the price tag for extending the 2017 Trump tax cuts is in the trillions.' Congress passed the legislation, a tax reform law that reduced rates across income brackets, in 2017 during President Donald Trump's first term. Which tax cuts are on the chopping block if the legislation isn't renewed by Dec. 31? Ontario will tariff electricity going to 3 US states on Monday, premier says Qualified Business Income deductions Also called the Section 199A deduction, the provision allows many owners of sole proprietorships, partnerships, S corporations and some trusts and estates to deduct up to 20% of their qualified business income, according to the Internal Revenue Service. The QBI deduction applies to tax years from Dec. 31, 2017, through Dec. 31, 2025. It also allows eligible taxpayers to deduct 20% of qualified real estate investment trust dividends and publicly traded partnership income. This does not apply to income earned through C corporations. The tax break primarily benefits the real estate and manufacturing industries. Republicans claim the deduction reduces tax burdens for small and mid-sized businesses. What to know about filing taxes in multiple states Business expense deductions The bonus depreciation, research and development, and business interest deductions could expire. The first allows a business taxpayer to deduct certain capital investments and will be phased out by 2027, according to Bloomberg Government. The research and development credit was increased under the Tax Cuts and Jobs Act, allowing applicable businesses to deduct more on their tax returns. Its future is uncertain. Business interest is the cost of interest on a business loan. The deduction 'will revert to pre-TCJA rules,' according to Bloomberg Government. International taxes An international tax agreement called Pillar 2 applies a 15% minimum tax rate for multinational enterprises with an annual revenue of 750 million Euros, or $814 million. The Tax Cuts and Jobs Act implemented a 'safe harbor' provision, shielding U.S. companies from some of the effects of Pillar 2. 'But given that the safe harbor provisions expire at the end of 2026, Congress will need to decide how to rectify the TCJA and Pillar 2 clash,' according to Bloomberg Government. Trump-district Democrats face risky vote on GOP spending bill The corporate tax rate does not expire. Under the Tax Cuts and Jobs Act, the corporate tax rate dropped from 35% to 21%, so businesses faced lower taxes. This provision does not expire, as lawmakers made the rate permanent. However, Congress is set to review the legislation in its entirety. Trump said he wants an even lower tax rate for companies that make their products in the U.S. His ideal rate is 15%. It's possible the Republican-led Congress could renew a majority of provisions, but lawmakers would need to find a funding source. In 2017, Republicans controlled the House and the Senate, easing the way for Trump's vision of a tax code overhaul. The Tax Cuts and Jobs Act was the largest tax code overhaul in nearly 30 years. Extending the 2017 legislation would reduce federal tax revenue by $4.5 trillion over the next 10 years, according to the Tax Foundation. Copyright 2025 Nexstar Media, Inc. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
Yahoo
31-01-2025
- Business
- Yahoo
Farmland Partners Announces Tax Treatment of 2024 Distributions
DENVER, January 31, 2025--(BUSINESS WIRE)--Farmland Partners Inc. (NYSE: FPI) (the "Company" or "FPI") today announced the tax treatment of our 2024 common stock distributions, as summarized in the following table. Farmland Partners 31154R109EIN: 46-3769850 Farmland Partners Inc. 2024 Dividend Treatment Common Stock Dividends Capital Gains DeclarationDate Payment Date Record Date DistributionPer Share DistributionPer Share Allocable to2024 TaxableOrdinary(Box 1a) Qualified (Box 1b)(1) Total(Box 2a) Unrecaptured Section 1250 (Box 2b) Return of Capital(Box 3)(2) Section 199A(Box 5)(1) 12/12/2023 1/12/2024 12/29/2023 $ 0.210000 $ 0.005147 $ 0.000652 $ - $ 0.004495 $ - $ - $ 0.000652 10/24/2023 1/17/2024 1/2/2024 $ 0.060000 $ 0.060000 $ 0.007599 $ - $ 0.052401 $ 0.007599 2/27/2024 4/15/2024 4/1/2024 $ 0.060000 $ 0.060000 $ 0.007599 $ - $ 0.052401 $ - $ - $ 0.007599 4/29/2024 7/15/2024 7/1/2024 $ 0.060000 $ 0.060000 $ 0.007599 $ - $ 0.052401 $ - $ - $ 0.007599 7/23/2024 10/15/2024 10/1/2024 $ 0.060000 $ 0.060000 $ 0.007599 $ - $ 0.052401 $ - $ - $ 0.007599 12/13/2024 1/8/2025 12/18/2024 $ 1.150000 $ 1.150000 $ 0.145638 $ - $ 1.004362 $ - $ - $ 0.145638 $ 1.600000 $ 1.395147 $ 0.176684 $ - $ 1.218463 $ - $ - $ 0.176684 Footnotes: (1) Qualified dividends and Section 199A dividends are a subset of, and included in, the taxable ordinary dividend amount. (2) Return of capital represents a return of stockholder investment. The special dividend of $0.21 per share declared December 12, 2023, and paid on or around January 12, 2024, is a split-year distribution with $0.0051474 per share considered a distribution made in 2024 for federal income tax purposes1. The special dividend of $1.15 per share declared December 13, 2024 for shareholders of record as of December 18, 2024, and paid on or around January 8, 2025, is considered to be a distribution made in 2024 for federal income tax purposes2. Pursuant to Treas. Reg. § 1.1061-4(b)(7)(i), the capital gains shown in box 2(a) are determined under Section 1231 and are excluded from "applicable partnership interest" disclosures. In 2024, there was no "Box 3 Nondividend Distribution" on form 1099-DIV, and therefore no requirement to file Form 8937. The Nareit REIT 1099-DIV Spreadsheet is available for download under the heading "2024 Dividend Information" at this link: Stockholders are encouraged to consult with their tax advisors as to the specific tax treatment of the distributions they received from us. About Farmland Partners Inc. Farmland Partners Inc. is an internally managed real estate company that owns and seeks to acquire high-quality North American farmland and makes loans to farmers secured by farm real estate. As of December 31, 2024, the Company owns and/or manages approximately 141,800 acres in 16 states, including Arkansas, California, Colorado, Illinois, Indiana, Iowa, Kansas, Louisiana, Mississippi, Missouri, Nebraska, North Carolina, Oklahoma, South Carolina, Texas, and West Virginia. In addition, the Company owns land and buildings for four agriculture equipment dealerships in Ohio leased to Ag Pro under the John Deere brand. The Company elected to be taxed as a REIT for U.S. federal income tax purposes, commencing with the taxable year ended December 31, 2014. Additional information: or (720) 452-3100. 1 The REIT declared a dividend in December of 2023, and it was payable to shareholders of record as of December of 2023. In accordance with IRC §857(b)(9) the dividend deemed paid in 2023 was limited to the earnings & profits at that time. The remaining balance that was not includable in 2023 should be reported as a 2024 dividend.2 The REIT declared a dividend in December 2024, payable to shareholders of record as of December 18, 2024. In accordance with IRC §857(b)(9) the dividend is deemed paid entirely in 2024 as it consists of undistributed 2024 earnings & profits. View source version on Contacts Susan Landiir@ Sign in to access your portfolio
