The new federal tax law have given note & real estate investors a gift they might not be aware of yet.
Owners of notes and investment property — from mom and pop landlords to big-time real estate moguls — could get a federal tax deduction of up to 20 percent of their net rental income for tax years 2018 through 2025. Most people who own shares in real estate investment trusts can also deduct up to 20 percent of their ordinary REIT dividends.
It comes under the section of HR1 titled “Deduction for qualified business income of pass-thru entities.” The new deduction could increase investor demand for real estate, offsetting any potential drop in demand from homeowners.
The pass-through provision is insanely complex, but it essentially lets owners of pass-through entities deduct up to 20 percent of their business income on their personal tax return, subject to certain limits.