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Home · Property Management · Tax Tips : 6 Ways Tax Extension Law Benefits Landlords

landlord helpThe legislation that extended the Bush-era tax cuts for two more years will likely benefit landlords in a number of ways.

The key portions of the bill which affect landlords include:

No increase in carried interest taxation.  This will continue to be taxed at the capital gains tax rate of 15%.

The scheduled increase in capital gains tax rates from 15% to 20%, and taxing qualified dividends as ordinary income up to the top rate of 39.6%, was stalled. Instead the current 15% tax rate will be applied to both for two years.

A number of provisions will help businesses, including full expensing for plant and equipment for 2011 (retroactive to September 8, 2010), up from 50% bonus depreciation in 2010, a return of 50% bonus depreciation in 2012, and a 2 percentage point payroll tax decrease in 2011.

Provisions on inheritance of property include an increased amount of exemption, up to $5 million, and more flexibility in basis rules for commercial real estate assets in estates.

The extension of many tax credit programs.

The overall real estate market will benefit from middle income tax cuts, allowing consumers more spending power.

However, efforts to repeal the new requirement that beginning in 2012, all landlords must report payments of $600 or more for services and goods on 1099’s, failed. (The 2011 version requires 1099’s on services only.) Credit card payments may be exempted in upcoming IRS regulations.

See more Tax Tips for Landlords.

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