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New Business Deduction Relative to Rental Properties

Posted by Admin Posted on May 09 2019


The New Business Deduction Relative to Rental Properties – under the current tax law most small business entities, which aren’t considered C Corporations, are allowed a 20% deduction against their net income.  This category of business entity includes sole proprietorships, pass through entities, such as S Corporations and LLC’s, as well as many rental activities, whether held in a business entity or not.  In order to qualify for the deduction as a rental activity, beginning with the 2019 tax year the owner must 1. Maintain a separate set of books to reflect the activity, 2. Perform all of the required rental services, or at least 250 or more hours per year, if not all services, and 3. Maintain contemporaneous records that show hours for services preformed, the dates of performance, as well as who performed them.  The typical rental activity services involved are advertising, lease negotiation, performance of repair and maintenance, and/or the management of the service provider, as well as rent collection and bill paying.  Please contact us, if you’d like to discuss these new 2019 record keeping requirements and how they apply to you and your rental activity.  Mike and Staff