Real Estate Owners Should Plan Now Before Tax Breaks Expire

Real Estate Owners Should Plan Now Before Tax Breaks Expire
Few can say that the​ U.S .​
income tax code is​ easy to​ navigate .​
To complicate matters further,​ taxpayers need to​ plan ahead to​ take advantage of​ recently enacted tax breaks that are scheduled to​ sunset at​ some point between now and December 31,​ 2010 .​
Below are some of​ the​ current tax savings opportunities set to​ expire soon,​ starting with those scheduled to​ expire at​ the​ end of​ 2018.
Energy Efficient Expenditures: Last year's Tax Act provides incentives for people who make energy efficient improvements to​ their homes or​ commercial buildings .​
Plus,​ manufacturers of​ energy efficient appliances get a​ tax credit for each unit produced,​ so consumers should ensure that this tax break is​ passed along to​ them with each qualifying purchase made .​
Most of​ these energy efficient tax breaks end on​ December 31,​ 2018.
$2,​000 Credit for Contractors: During 2018 and 2018,​ homeowners who purchase a​ newly constructed energy efficient home,​ or​ have their home substantially rehabbed to​ become more energy efficient,​ need to​ be aware that the​ contractor is​ eligible for a​ $2,​000 tax credit from the​ IRS .​
Increased Section 179 Deduction: Through the​ end of​ 2018,​ taxpayers can elect to​ write-off the​ first $108,​000 (in 2018,​ up from $105,​000 in​ 2018) of​ equipment purchased each year,​ instead of​ depreciating the​ cost of​ that equipment over its useful life of​ 5 or​ 7 years .​
Starting in​ 2008,​ the​ Section 179 deduction will once again be limited to​ just $25,​000 per year .​
Anyone purchasing a​ business or​ adding equipment to​ an​ existing business should consider doing so before December 31,​ 2018,​ to​ allow for a​ much larger upfront tax deduction.
Here are a​ few tax breaks scheduled to​ expire in​ 2008 that will impact the​ capital gains tax rate.
Reduced Tax Rate on​ Capital Gains: Currently,​ the​ maximum tax rate on​ long-term capital gains (assets held for more than one year before being sold) is​ 15 percent .​
Effective January 1,​ 2009,​ the​ capital gains tax rate is​ scheduled to​ jump by one-third to​ 20 percent .​
Investors who plan to​ sell any of​ their real estate or​ investments at​ some point this decade should consider selling appreciated assets on​ or​ before December 31,​ 2008 to​ lock in​ the​ lower tax rate .​
Congress is​ trying to​ extend this provision through 2010.
Zero Percent Capital Gains Tax Rate: the​ 2003 Tax Act provides for a​ zero percent capital gains tax rate during 2008 only for people in​ the​ lowest tax bracket .​
Individuals should consider gifting appreciated property to​ their children or​ grandchildren who will be 14 or​ older that year,​ and have them sell those investments .​
Provided the​ child realizes capital gains of​ about $30k,​ no tax will be owed on​ that gain (assuming the​ child has no other income) .​
Parents hoping for financial aid for that child need to​ consider how this strategy might impact that child's potential college financial aid package.
Most everything else expires in​ 2010
The biggest tax planning challenge is​ what to​ do after 2010 .​
On December 31,​ 2010,​ the​ 2001 Tax Act is​ scheduled to​ sunset,​ with the​ bulk of​ the​ tax rules returning to​ the​ pre-2001 rules .​
This means that the​ marriage penalty,​ stealth tax,​ and reduced retirement and education savings limits will return .​
How Congress and the​ President elected in​ 2008 will deal with the​ U.S .​
income tax code as​ the​ provisions of​ the​ 2001 Tax Act sunset is​ anyone's guess.
Plan Ahead
Tax planning one year at​ a​ time used to​ do the​ trick .​
In 2018,​ with major tax breaks expiring in​ three out of​ the​ next four years,​ tax planning is​ now a​ five year proposition .​
It's best to​ start doing it​ today,​ and project out a​ few years,​ keeping these tax dates in​ consideration.
Good luck,​
Real Estate Owners Should Plan Now Before Tax Breaks Expire Real Estate Owners Should Plan Now Before Tax Breaks Expire Reviewed by Henda Yesti on June 26, 2018 Rating: 5

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